For loans closed since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your mortgage closing past July '99), regardless of the original purchase price, when the equity rises to twenty percent.
Analyze your statements often. Find out the prices of other houses in your immediate area. If your loan is fewer than five years old, probably you haven't made much progress with the principal � you have been paying mostly interest.
Once your equity has risen to the magic number of twenty percent, you are close to canceling your PMI payments, for the life of your loan. Contact your lender to ask for cancellation of your PMI. Lending institutions ask for proof of eligibility at this point. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
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