For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of your purchase amount � but not at the point the borrower earns 22 percent equity. (A number of "higher risk" loan programs are excluded.) But you have the right to cancel PMI yourself (for mortgages closed past July 1999) when your equity reaches 20 percent, no matter the original purchase price.
Familiarize yourself with your loan statements to keep your eye on principal payments. Find out the selling prices of other houses in your neighborhood. If your mortgage is fewer than five years old, probably you haven't greatly reduced principal � it's been mostly interest.
Once you think you've reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will need to call your mortgage lender to let them know that you wish to cancel PMI payments. Then you will be asked to submit proof that you have at least 20 percent equity. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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