For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of your purchase price � but not when the borrower achieves 22 percent equity. (The law does not cover a number of higher risk mortgages.) However, if your equity reaches 20% (no matter what the original purchase price was), you have the right to cancel the PMI (for a loan closed past July 1999).
Verify the numbers
Familiarize yourself with your monthly statements to keep a running total of principal payments. You'll want to stay aware of the the purchase amounts of the homes that are selling around you. Unfortunately, if yours is a recent mortgage - five years or under, you likely haven't had a chance to pay much of the principal: you are paying mostly interest.
Once your equity has risen to the required twenty percent, you are not far away from stopping your PMI payments, for the life of your loan. You will need to contact the lender to let them know that you want to cancel PMI payments. Then you will be asked to submit proof that you have at least 20 percent equity. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably request one before they agree to cancel.
At Chase Mortgage, we answer questions about PMI every day. Call us: 435-755-6622.