Make Private Mortgage Insurance a Thing of the Past

Although lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance goes below 78% of the price of purchase, they do not have to cancel automatically if the borrower's equity is more than 22%. (The legal requirement does not cover certain higher risk mortgages.) But if your equity reaches 20% (no matter what the original price was), you are able to cancel PMI (for a loan closed past July 1999).

Do your homework

Review your loan statements often. You'll want to be aware of the the purchase prices of the homes that sell around you. Unfortunately, if you have a recent mortgage loan - five years or fewer, you probably haven't begun to pay a lot of the principal: you have been paying mostly interest.

Verify Eligibility

When you find you've achieved at least 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. First you will let your lender know that you are requesting to cancel PMI. Lenders require proof of eligibility at this point. You can get proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.