For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase price � but not at the point the loan reaches 22 percent equity. (This legal requirment does not include a number of higher risk mortgages.) However, if your equity gets to 20% (no matter what the original price was), you can cancel your PMI (for a loan closed past July 1999).
Study your statements often. You'll want to be aware of the prices of the homes that are selling around you. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't gone down much.
Once your equity has risen to the magic number of twenty percent, you are close to stopping your PMI payments, for the life of your loan. You will need to contact the lender to alert them that you wish to cancel PMI. Next, you will be asked to verify that you have at least 20 percent equity. You can get documentation 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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