Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed past July of that year) goes down below seventy-eight percent of the purchase price, but not when the borrower's equity reaches twenty-two percent or higher. (Certain "higher risk" mortgage loans are not included.) But if your equity reaches 20% (regardless of the original purchase price), you are able to cancel your PMI (for a loan that after July 1999).
Keep a running total of each principal payment. You'll want to keep track of the the purchase amounts of the houses that sell in your neighborhood. Unfortunately, if yours is a new mortgage - five years or under, you likely haven't been able to pay very much of the principal: you have been paying mostly interest.
At the point you find you have reached 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to contact your lender to let them know that you want to cancel PMI payments. The lending institution will ask for proof that your equity is at 20 percent or above. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they'll cancel PMI.
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