For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (There are some loans that are not covered by this law -like some "high risk' loans.) The good news is that you can cancel your PMI yourself (for a mortgage closing past July '99), without considering the original purchase price, at the point your equity rises to twenty percent.
Familiarize yourself with your mortgage statements to keep your eye on principal payments. Pay attention to the prices of other houses in your neighborhood. If your loan is fewer than five years old, probably you haven't greatly reduced principal � you have been paying mostly interest.
As soon as your equity has risen to the magic number of twenty percent, you are close to canceling your PMI payments, once and for all. Call the mortgage lender to ask for cancellation of your PMI. Then you will be required to verify that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and your lender will probably require one before they'll cancel PMI.
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