For loans made after 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 your purchase amount � but not when the loan reaches 22 percent equity. (This legal requirment does not apply to a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for loans closed past July 1999) when your equity reaches 20 percent, no matter the original price of purchase.
Keep track of your principal payments. You'll want to keep track of the the purchase amounts of the homes that are selling around you. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't started to pay very much of the principal: you have been paying mostly interest.
You can start the process of canceling PMI when you you think that your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI payments. Then you will be required to verify that you have at least 20 percent equity. You can acquire documentation of your home's equity by getting a state certified appraisal on 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.