For loans made after July 1999, lending institutions are obligated (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 at the point the borrower earns 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) But if your equity reaches 20% (no matter what the original purchase price was), you can cancel your PMI (for a loan closed after July 1999).
Familiarize yourself with your mortgage statements to keep track of principal payments. Also be aware of how much other homes are purchased for in your neighborhood. Unfortunately, if yours is a new mortgage loan - five years or fewer, you likely haven't begun to pay very much of the principal: you are paying mostly interest.
At the point your equity has risen to the required twenty percent, you are close to getting rid of your PMI payments, once and for all. Call your mortgage lender to request cancellation of your 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 equity and eligibility for 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.