For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (There are some exceptions -like a number of "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing after July '99), without considering the original purchase price, once your equity gets to twenty percent.
Keep track of your principal payments. Also keep track of what other homes are purchased for in your neighborhood. If your mortgage is fewer than five years old, it's likely you haven't made much progress with the principal � it's been mostly interest.
When you think you have achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. Contact your lender to ask for cancellation of your PMI. Then you will be asked to submit proof that you are eligible to cancel. A state certified appraisal documented on 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.
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