Since 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans made after July of that year) goes under seventy-eight percent of the price of purchase, but not at the time the borrower's equity gets to twenty-two percent or higher. (A number of "higher risk" loan programs are excluded.) The good news is that you can request cancelation of your PMI yourself (for a mortgage closing after July '99), regardless of the original price of purchase, once the equity climbs to twenty percent.
Keep a running total of money going toward the principal. You'll want to be aware of the the purchase amounts of the houses that sell in your neighborhood. If your loan is fewer than five years old, chances are you haven't made much progress with the principal � you have been paying mostly interest.
You can start the process of PMI cancelation at the time you you think that your equity has risen to 20%. You will need to call the mortgage lender to let them know that you want to cancel PMI payments. Next, you will be required to submit documentation that you have at least 20 percent equity. Usually lenders ask for 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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