- 1). Call your lender to ask about the procedures for having your PMI canceled. In most cases, the lender will need to see proof that you now have at least 20 to 25 percent equity in your house.
- 2). Check your original principal balance as compared to your current balance to get an idea of how far you've come with your payments. According to the Homeowners' Protection Act, if you purchased your home after July 29, 1999, the lender is supposed to automatically stop charging you PMI when you pay the loan down to 78 percent of the original principal balance.
- 3). Hire a reputable appraiser to evaluate your home's current worth. If the appraiser determines that the current value of your home exceeds your loan balance by 20 percent or more, you may be in a position to call and request a PMI cancellation.
- 4). Calculate your loan to value (LTV) percentage as an easy way to determine if you are in good territory after the appraisal. Oftentimes the lender will need to see an LTV of 80 percent or less in order to cancel PMI. The LTV percentage is the loan amount divided by your home's worth and then multiplied by 100. For instance, if your loan balance is $100,000 and the appraiser tells you that the home's value is $125,000, your LTV is 80 percent.
- 5). Determine your equity in the home. This is the value minus the loan balance or 100 percent minus the LTV percentage. So in our example in the last step, you have $25,000 or 20 percent equity in the home.
- 6). Call your lender again if you determine that your equity and LTV are in the right range to end your PMI payments. Explain your case and fax over a copy of your appraisal if necessary. Ask the lender to end your PMI payments immediately.
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