Canceling Private Mortgage Insurance

Although lending institutions have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) when the balance dips under 78% of the price of purchase, they do not have to take similar action if the equity is above 22%. (There are some exceptions -like some loans considered 'high risk'.) However, you are able to cancel PMI yourself (for loans made past July 1999) when your equity reaches 20 percent, regardless of the original purchase price.

Do your homework

Keep a running total of money going toward the principal. You'll want to keep track of the the purchase prices of the houses that sell in your neighborhood. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't had a chance to pay a lot of the principal: you are paying mostly interest.

The Proof is in the Appraisal

When you think you have achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. You will first notify you lender  that you are asking to cancel your PMI. Lenders ask for paperwork verifying your eligibility at this point. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.