For loans made after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets lower than 78 percent of the purchase amount � but not when the borrower achieves 22 percent equity. (This legal requirment does not apply to certain higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed after July '99), regardless of the original purchase price, once the equity reaches twenty percent.
Verify the numbers
Review your statements often. Pay attention to the prices of other houses in your neighborhood. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't gone down much.
Once your equity has reached the required twenty percent, you are close to getting rid of your PMI payments, once and for all. You will need to call the lending institution to alert them that you want to cancel PMI. Next, you will be required to verify that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
At Iltis Lending Group, we answer questions about PMI every day. Call us at (941) 954-4252.