For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of your purchase amount but not at the point the borrower achieves 22 percent equity. (The law does not apply to certain higher risk mortgages.) However, if your equity reaches 20% (no matter what the original purchase price was), you are able to cancel PMI (for a mortgage that past July 1999).
Keep track of your principal payments. Also keep track of how much other homes are being sold for in your neighborhood. If your mortgage is under five years old, chances are you haven't greatly reduced principal it's been mostly interest.
When you think you've achieved at least 20 percent equity, you can begin the process of getting PMI out of your budget. You will need to contact the lender to alert them that you wish to cancel PMI. Lenders require proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is and most lending institutions require one before they agree to cancel.
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