Although lenders have been obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) when the balance goes below 78% of the purchase price, they do not have to cancel automatically if the equity is above 22%. (The legal requirement does not include some higher risk mortgages.) However, if your equity reaches 20% (no matter what the original price was), you have the legal right to cancel PMI (for a mortgage loan closed past July 1999).
Study your statements often. You'll want to be aware of the the purchase prices of the homes that are selling in your neighborhood. If your loan is fewer than five years old, it's likely you haven't made much progress with the principal - you have been paying mostly interest.
Once you think you've reached 20 percent equity in your home, you can start the process of canceling your Private Mortgage Insurance. You will first let your lending institution know that you are asking to cancel your PMI. Lenders require proof of eligibility at this point. You can acquire proof of your home's 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.