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 gets below 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (This legal requirment does not apply to certain higher risk mortgages.) However, you have the right to cancel PMI yourself (for mortgage loans closed after July 1999) when your equity gets to 20 percent, no matter the original purchase price.
Keep track of your principal payments. Also stay aware of how much other homes are selling for in your neighborhood. If your mortgage is under five years old, it's likely you haven't greatly reduced principal � you have paid mostly interest.
When you determine you have achieved at least 20 percent equity, you can begin the process of freeing yourself from PMI payments. First you will tell your lender that you are requesting to cancel PMI. Lenders ask for paperwork verifying your eligibility at this point. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's 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.