For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (The law does not include certain higher risk mortgages.) But you are able to cancel PMI yourself (for mortgage loans made past July 1999) once your equity reaches 20 percent, no matter the original price of purchase.
Keep track of your principal payments. Make yourself aware of the purchase prices of other homes in your neighborhood. Unfortunately, if yours is a new mortgage loan - five years or fewer, you likely haven't had a chance to pay much of the principal: you have been paying mostly interest.
You can start the process of PMI cancelation as soon as you determine your equity has reached 20%. First you will tell your lender that you are asking to cancel PMI. Your lender will ask for documentation that your equity is high enough. You can get proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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