For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (The law does not include a number of higher risk mortgages.) However, if your equity rises to 20% (regardless of the original price of purchase), you have the right to cancel the PMI (for a mortgage loan that after July 1999).
Keep a running total of your principal payments. You'll want to be aware of the the purchase amounts of the homes that are selling around you. Unfortunately, if yours is a recent mortgage loan - five years or under, you likely haven't started to pay very much of the principal: you have been paying mostly interest.
At the point you think you've achieved at least 20 percent equity in your home, you can begin the process of getting PMI out of your budget. Contact the mortgage lender to request cancellation of PMI. Your lender will require documentation that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and almost all lenders will require one before they agree to cancel PMI.
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