Beginning in 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made after July of '99) goes below seventy-eight percent of the purchase price, but not when the loan's equity climbs to twenty-two percent or higher. (A number of "higher risk" mortgage loans are not included.) The good news is that you can cancel your PMI yourself (for a loan closing after July '99), regardless of the original purchase price, after your equity reaches twenty percent.
Do your homework
Study your mortgage statements often. Also be aware of what other homes are purchased for in your neighborhood. If your loan is fewer than five years old, chances are you haven't paid down much principal - it's been mostly interest.
Verify Eligibility
Once your equity has reached the desired twenty percent, you are close to stopping your PMI payments, once and for all. Contact your lender to ask for cancellation of your Private Mortgage Insurance. Lenders request proof of eligibility at this point. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
