For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (The legal obligation does not apply to a number of higher risk mortgages.) But if your equity reaches 20% (no matter what the original purchase price was), you have the legal right to cancel the PMI (for a mortgage that after July 1999).
Keep track of money going toward the principal. Also stay aware of the price that other homes are purchased for in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't been reduced by much.
You can begin the process of PMI cancelation as soon as you're sure your equity has risen to 20%. First you will notify your lender that you are asking to cancel your PMI. Lenders request proof of eligibility at this point. You can get proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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