Although lending institutions have been obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance gets under 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is over 22%. (The legal obligation does not include some higher risk mortgages.) However, if your equity gets to 20% (regardless of the original price of purchase), you have the right to cancel your PMI (for a mortgage closed after July 1999).
Do your homework
Familiarize yourself with your monthly statements to keep your eye on principal payments. Find out the purchase prices of other houses in your immediate area. You've been paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal probably hasn't lowered much.
Verify Equity Amount
As soon as your equity has reached the required twenty percent, you are just a few steps away from stopping your PMI payments, for the life of your loan. You will first let your lender know that you are asking to cancel PMI. Your lender will require documentation that your equity is high enough. You can get proof of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lending institutions before canceling PMI.
U.S.A. Lending, Inc. can help find out if you can eliminate your PMI. Call us: 305-967-7200.