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 falls under 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (A number of "higher risk" loan programs are not included.) However, you are able to cancel PMI yourself (for mortgages closed after July 1999) at the point your equity rises to 20 percent, without consideration of the original price of purchase.
Study your statements often. You'll want to stay aware of the the purchase prices of the houses that sell in your neighborhood. Unfortunately, if yours is a recent mortgage loan - five years or fewer, you probably haven't had a chance to pay very much of the principal: you have been paying mostly interest.
When you determine you have achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. First you will let your lending institution know that you are asking to cancel your PMI. The lending institution will ask for proof that your equity is at 20 percent or above. You can acquire documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.