For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes lower than 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (The legal requirment does not cover a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for loans made past July 1999) when your equity gets to 20 percent, no matter the original price of purchase.
Familiarize yourself with your mortgage statements to keep track of principal payments. Find out the prices of other homes in your neighborhood. You've been paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
Once you find you've achieved at least 20 percent equity, you can start the process of freeing yourself from PMI payments. You will first notify your lender that you are requesting to cancel PMI. Lenders require proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably request one before they agree to cancel.
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.