Eliminating Private Mortgage Insurance

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 borrower earns 22 percent equity. (The law does not include certain higher risk mortgages.) But you are able to cancel PMI yourself (for mortgage loans made past July 1999) once your equity reaches 20 percent, without consideration of the original price of purchase.

Do your homework

Familiarize yourself with your monthly statements to keep track of principal payments. Pay attention to the purchase prices of other homes in your neighborhood. If your mortgage is fewer than five years old, chances are you haven't made much progress with the principal - you have paid mostly interest.

The Proof is in the Appraisal

When you find you have achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. First you will notify your lender that you are asking to cancel your PMI. Then you will be asked to submit documentation that you are eligible to cancel. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.