Although lending institutions have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance gets below 78% of the purchase price, they do not have to cancel automatically if the equity is above 22%. (There are some loans that are not covered by this law -like a number of "high risk' loans.) But if your equity rises to 20% (no matter what the original purchase price was), you can cancel your PMI (for a mortgage loan closed after July 1999).
Familiarize yourself with your loan statements to keep your eye on principal payments. Also keep track of what other homes are selling for in your neighborhood. Unfortunately, if you have a new mortgage - five years or under, you probably haven't been able to pay much of the principal: you have been paying mostly interest.
Once you find you've reached 20 percent equity in your home, you can start the process of getting PMI out of your budget. You will first let your lender know that you are asking to cancel your PMI. Your lender will request proof that your equity is at 20 percent or above. The best proof there is can be found in a state certified appraisal on 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.