While lending institutions have been legally obligated (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance goes under 78% of the purchase price, they do not have to take similar action if the borrower's equity is above 22%. (The legal requirment does not cover some higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for a mortgage that closed after July '99), regardless of the original price of purchase, once the equity climbs to twenty percent.
Study your monthly statements often. You'll want to stay aware of the the purchase prices of the homes that sell in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't lowered much.
Once you determine you've achieved at least 20 percent equity in your home, you can start the process of canceling your Private Mortgage Insurance. First you will tell your lender that you are asking to cancel your PMI. Then you will be asked to verify that you are eligible to cancel. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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