For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls lower than 78 percent of your purchase amount � but not at the point the borrower earns 22 percent equity. (There are some loans that are excluded -like some loans considered 'high risk'.) The good news is that you can request cancelation of your PMI yourself (for your mortgage loan closing after July '99), without considering the original purchase price, after the equity rises to twenty percent.
Familiarize yourself with your monthly statements to keep your eye on principal payments. Also stay aware of the price that other homes are selling for 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 lowered much.
At the point your equity has risen to the desired twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. First you will tell your lender that you are asking to cancel PMI. The lending institution will require proof that your equity is high enough. Most lenders require 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.
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