For loans closed since July 1999, lenders 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 when the borrower achieves 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) However, if your equity gets to 20% (regardless of the original purchase price), you have the legal right to cancel the PMI (for a loan closed past July 1999).
Do your homework
Familiarize yourself with your mortgage statements to keep track of principal payments. Also keep track of how much other homes are purchased for in your neighborhood. If your loan is fewer than five years old, chances are you haven't greatly reduced principal � you have been paying mostly interest.
The Proof is in the Appraisal
As soon as your equity has risen to the magic number of twenty percent, you are just a few steps away from getting rid of your PMI payments, for the life of your loan. First you will tell your lender that you are requesting to cancel your PMI. The lending institution will ask for documentation that your equity is high enough. You can acquire proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
At Chase Mortgage, we answer questions about PMI every day. Call us at 435-755-6622.