Although lending institutions have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes below 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is above 22%. (The law does not cover certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage loan closing after July '99), without considering the original purchase price, after the equity rises to twenty percent.
Familiarize yourself with your loan statements to keep a running total of principal payments. Make yourself aware of the selling prices of other houses in your neighborhood. If your mortgage is under five years old, probably you haven't paid down much principal � you have paid mostly interest.
You can begin the process of canceling PMI when you calculate that your equity reaches 20%. You will need to notify your mortgage lender that you want to cancel PMI. Your lender will request proof that your equity is high enough. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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.