For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes under 78 percent of your purchase amount � but not at the point the loan reaches 22 percent equity. (There are some loans that are excluded -like certain "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your loan closing after July '99), no matter the original price of purchase, once your equity reaches twenty percent.
Study your monthly statements often. Pay attention to the prices of other houses in your neighborhood. You are paying mostly interest if your loan closed fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
You can start the process of PMI cancelation as soon as you you think that your equity has reached 20%. You will first let your lending institution know that you are asking to cancel PMI. Next, you will be required to verify that you are eligible to cancel. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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