For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls under 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (There are some loans that are excluded -like some loans considered 'high risk'.) But if your equity gets to 20% (no matter what the original price was), you have the right to cancel your PMI (for a mortgage that after July 1999).
Study your statements often. Make yourself aware of the purchase prices of other houses in your neighborhood. You've been paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal most likely hasn't gone down much.
You can start the process of PMI cancelation when you calculate that your equity reaches 20%. You will need to contact the lending institution to let them know that you wish to cancel PMI. Lending institutions ask for proof of eligibility at this point. You can acquire documentation of your 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.
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