While lenders have been legally required (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance goes under 78% of the purchase price, they do not have to cancel PMI automatically if the equity is more than 22%. (There are some exceptions -like some loans considered 'high risk'.) However, you can actually cancel PMI yourself (for mortgage loans closed after July 1999) when your equity gets to 20 percent, without consideration of the original purchase price.
Study your statements often. Also be aware of the price that other homes are purchased for in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't begun to pay very much of the principal: you have been paying mostly interest.
You can start the process of canceling your PMI at the time you calculate that your equity reaches 20%. First you will tell your lender that you are asking to cancel PMI. The lending institution will require documentation that your equity is high enough. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) documents your equity amount � and almost all lending institutions require one before they'll cancel 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.