For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of your purchase amount � but not at the point the borrower achieves 22 percent equity. (The legal obligation does not apply to a number of higher risk mortgages.) But you are able to cancel PMI yourself (for mortgage loans closed past July 1999) once your equity gets to 20 percent, regardless of the original purchase price.
Do your homework
Keep track of your principal payments. Also keep track of what other homes are selling for in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal most likely hasn't lowered much.
Proof of Equity
At the point your equity has risen to the desired twenty percent, you are not far away from canceling your PMI payments, once and for all. First you will let your lending institution know that you are asking to cancel PMI. Lenders ask for documentation verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they agree to cancel PMI.
At Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234, we answer questions about PMI every day. Give us a call: 214-663-5355.