Although lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is over 22%. (There are some loans that are not included -like certain "high risk' loans.) But if your equity gets to 20% (no matter what the original purchase price was), you are able to cancel your PMI (for a mortgage that after July 1999).
Familiarize yourself with your monthly statements to keep your eye on principal payments. Find out the purchase prices of other houses in your neighborhood. If your loan is under five years old, it's likely you haven't made much progress with the principal � it's been mostly interest.
At the point you think you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to contact the lending institution to let them know that you wish to cancel PMI. Next, 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.
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