For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase amount - but not when the borrower earns 22 percent equity. (There are exceptions -like some "high risk' loans.) The good news is that you can cancel your PMI yourself (for your loan that closed past July '99), regardless of the original purchase price, at the point the equity gets to twenty percent.
Study your statements often. You'll want to stay aware of the the purchase amounts of the houses that are selling in your neighborhood. If your loan is fewer than five years old, it's likely you haven't paid down much principal - it's been mostly interest.
Once you think you've reached 20 percent equity, you can begin the process of getting PMI out of your budget. First you will notify your lender that you are asking to cancel PMI. Next, you will be asked to submit documentation that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is - and almost all lending institutions request one before they'll cancel PMI.
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