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 below 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (The legal requirment does not cover certain higher risk mortgages.) But you can actually cancel PMI yourself (for mortgage loans closed past July 1999) once your equity rises to 20 percent, without consideration of the original price of purchase.
Keep track of each principal payment. You'll want to stay aware of the prices of the homes that sell in your neighborhood. Unfortunately, if you have a recent mortgage - five years or fewer, you probably haven't had a chance to pay a lot of the principal: you are paying mostly interest.
When you think you've achieved at least 20 percent equity, you can begin the process of getting PMI out of your budget. You will need to notify your mortgage lender that you want to cancel PMI payments. The lending institution will require proof that your equity is high enough. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before 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.