Make Private Mortgage Insurance a Thing of the Past

For loans closed after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of your purchase price - but not when the loan reaches 22 percent equity. (The legal obligation does not cover certain higher risk mortgages.) The good news is that you can cancel your PMI yourself (for your mortgage loan that closed past July '99), regardless of the original purchase price, after your equity reaches twenty percent.

Keep a record of payments

Analyze your statements often. Find out the selling prices of other homes in your immediate area. You've been paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.

Verify Equity Amount

You can begin the process of canceling your PMI as soon as you determine your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Next, you will be asked to submit documentation that you have at least 20 percent equity. You can acquire documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.