For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (This legal requirment does not include certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage that closed after July '99), regardless of the original purchase price, when the equity rises to twenty percent.
Study your statements often. Find out the selling prices of other houses in your immediate area. Unfortunately, if you have a new mortgage - five years or fewer, you likely haven't started to pay a lot of the principal: you are paying mostly interest.
At the point your equity has risen to the magic number of twenty percent, you are close to stopping your PMI payments, once and for all. You will first let your lender know that you are requesting to cancel PMI. The lending institution will request documentation that your equity is high enough. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for canceling PMI.
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