For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of your purchase amount � but not when the borrower achieves 22 percent equity. (Certain "higher risk" morgages are excluded.) However, you can actually cancel PMI yourself (for mortgages made past July 1999) once your equity reaches 20 percent, without consideration of the original price of purchase.
Keep a running total of your principal payments. Also keep track of the price that other homes are purchased for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't paid down much principal � you have paid mostly interest.
Once your equity has risen to the magic number of twenty percent, you are close to getting rid of your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be asked to verify that you have at least 20 percent equity. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.
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