Although lending institutions have been legally required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance dips below 78% of the purchase price, they do not have to cancel automatically if the loan's equity is over 22%. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) But you are able to cancel PMI yourself (for mortgages closed past July 1999) when your equity rises to 20 percent, without consideration of the original price of purchase.
Study your statements often. You'll want to keep track of the the purchase amounts of the homes that are selling around you. Unfortunately, if you have a new mortgage - five years or fewer, you probably haven't begun to pay much of the principal: you have been paying mostly interest.
When you think you've reached 20 percent equity in your home, you can start the process of getting PMI out of your budget. You will first tell your lender that you are requesting to cancel PMI. Next, you will be required to submit proof that you are eligible to cancel. 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 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.