For loans closed since July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets under 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (This legal obligation does not include certain higher risk mortgages.) But if your equity reaches 20% (no matter what the original purchase price was), you have the right to cancel PMI (for a loan closed after July 1999).
Keep a running total of your principal payments. Make yourself aware of the selling prices of other houses in your neighborhood. Unfortunately, if yours is a new mortgage loan - five years or under, you likely haven't begun to pay very much of the principal: you have been paying mostly interest.
Once you think you've achieved at least 20 percent equity in your home, you can begin the process of getting PMI out of your budget. Contact the lender to ask for cancellation of PMI. Lenders require proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel.
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.