While lending institutions have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance goes below 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is over 22%. (There are exceptions -like some "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for your mortgage that closed after July '99), no matter the original purchase price, after the equity reaches twenty percent.
Keep track of each principal payment. You'll want to keep track of the prices of the houses that are selling in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't gone down much.
You can begin the process of PMI cancelation as soon as you determine your equity has risen to 20%. You will first notify your lender that you are requesting to cancel your PMI. Then you will be required to verify that you have at least 20 percent equity. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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