For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (There are exceptions -like certain "high risk' loans.) However, you have the right to cancel PMI yourself (for loans closed after July 1999) once your equity rises to 20 percent, no matter the original purchase price.
Familiarize yourself with your loan statements to keep a running total of principal payments. Pay attention to the prices of other houses in your immediate area. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal most likely hasn't lowered much.
You can begin the process of canceling PMI as soon as you're sure your equity reaches 20%. You will need to call your lender to let them know that you want to cancel PMI payments. Then you will be required to verify that you have at least 20 percent equity. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions 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.