For loans made since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of the purchase amount - but not at the point the loan reaches 22 percent equity. (A number of "higher risk" loan programs are not included.) The good news is that you can cancel your PMI yourself (for a loan that closed past July '99), regardless of the original price of the purchase, after your equity climbs to twenty percent.
Study your statements often. Find out the purchase prices of other houses in your immediate area. If your loan is fewer than five years old, it's likely you haven't greatly reduced principal - it's mostly interests.
When you determine you've reached 20 percent equity, you can begin the process of getting PMI out of your budget. You will need to notify your mortgage lender that you want to cancel PMI payments. Next, you will be asked to verify that you are eligible to cancel. Most lenders require a state-certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for 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.