Beginning in 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed past July of '99) goes below seventy-eight percent of the purchase price, but not when the borrower's equity reaches twenty-two percent or more. (This legal requirment does not cover some higher risk mortgages.) But if your equity reaches 20% (regardless of the original price of purchase), you have the legal right to cancel the PMI (for a mortgage closed past July 1999).
Familiarize yourself with your loan statements to keep your eye on principal payments. Make yourself aware of the prices of other houses in your neighborhood. Unfortunately, if you have a recent mortgage loan - five years or fewer, you likely haven't had a chance to pay very much of the principal: you have been paying mostly interest.
As soon as your equity has reached the desired twenty percent, you are not far away from canceling your PMI payments, for the life of your loan. Contact the lender to ask for cancellation of PMI. Your lender will request proof that your equity is at 20 percent or above. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is 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.