For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase amount � but not when the borrower earns 22 percent equity. (There are some loans that are excluded -like some loans considered 'high risk'.) However, if your equity rises to 20% (regardless of the original purchase price), you can cancel PMI (for a mortgage closed after July 1999).
Keep a running total of money going toward the principal. Find out the selling prices of other houses in your neighborhood. Unfortunately, if you have a new loan - five years or under, you likely haven't been able to pay much of the principal: you are paying mostly interest.
You can begin the process of canceling your PMI when you you think that your equity has reached 20%. You will need to contact your lender to let them know that you want to cancel PMI. Your lender will require proof that your equity is at 20 percent or above. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for PMI cancellation.
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