For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of your purchase price � but not at the point the borrower earns 22 percent equity. (Some "higher risk" morgages are excluded.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), without considering the original purchase price, after your equity climbs to twenty percent.
Keep a running total of money going toward the principal. You'll want to keep track of the the purchase amounts of the houses that are selling in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
You can begin the process of PMI cancelation when you're sure your equity has risen to 20%. You will need to notify your mortgage lender that you want to cancel PMI. Next, you will be asked to submit proof that you are eligible to cancel. 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 request one before they agree to cancel PMI.
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