Goodbye, PMI!
For loans made since July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls below 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (There are exceptions -like some "high risk' loans.) However, if your equity rises to 20% (no matter what the original price was), you have the legal right to cancel PMI (for a mortgage closed after July 1999).
Do your homework
Familiarize yourself with your loan statements to keep your eye on principal payments. Also stay aware of what other homes are being sold for in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't made much progress with the principal � it's been mostly interest.
Proof of Equity
At the point your equity has risen to the magic number of twenty percent, you are close to stopping your PMI payments, for the life of your loan. You will first tell your lender that you are asking to cancel PMI. Next, you will be asked to submit proof that you are eligible to cancel. Most lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.