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 goes lower than 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) But you can actually cancel PMI yourself (for mortgage loans closed after July 1999) when your equity gets to 20 percent, without consideration of the original price of purchase.
Analyze your statements often. Also stay aware of the price that other homes are purchased for in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
You can begin the process of canceling your PMI when you you think that your equity has reached 20%. First you will tell your lender that you are requesting to cancel your PMI. The lending institution will require proof that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel PMI.
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