Goodbye, PMI!

Although lenders have been obligated (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the mortgage balance gets under 78% of the price of purchase, they do not have to cancel automatically if the borrower's equity is over 22%. (This legal requirement does not cover certain higher risk mortgages.) But if your equity reaches 20% (regardless of the original price of purchase), you can cancel PMI (for a mortgage closed after July 1999).

Do your homework

Keep track of each principal payment. Find out the prices of other houses in your immediate area. If your loan is fewer than five years old, chances are you haven't paid down much principal - it's been mostly interest.

The Proof is in the Appraisal

As soon as your equity has risen to the magic number of twenty percent, you are close to canceling your PMI payments, once and for all. Contact the mortgage lender to request cancellation of PMI. The lending institution will require documentation that your equity is high enough. 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.