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 goes lower than 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (There are some loans that are not included -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan that closed past July '99), no matter the original purchase price, when your equity climbs to twenty percent.
Familiarize yourself with your monthly statements to keep a running total of principal payments. Also keep track of the price that other homes are purchased for in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you probably haven't started to pay much of the principal: you have been paying mostly interest.
You can begin the process of PMI cancelation as soon as you're sure your equity has risen to 20%. Call the lender to request cancellation of your PMI. Lenders ask for documentation verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and most lending institutions will require one before they agree to cancel PMI.
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