For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls lower than 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (This legal obligation does not apply to some higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgage loans closed after July 1999) at the point your equity rises to 20 percent, no matter the original purchase price.
Keep track of your principal payments. Also stay aware of how much other homes are being sold for in your neighborhood. If your mortgage is fewer than five years old, probably you haven't greatly reduced principal � it's been mostly interest.
Once your equity has reached the desired twenty percent, you are close to stopping your PMI payments, for the life of your loan. You will need to notify your mortgage lender that you wish to cancel PMI. Your lender will request documentation that your equity is high enough. You can get documentation of your equity by getting a state certified appraisal on 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.