How can I cancel private mortgage insurance? Cary NC

There are two primary ways to cancel private mortgage insurance (PMI), but both are dependent on your having paid at least 20 percent of the principal on your loan. That’s because lenders worry they won’t recoup their investment if a lender defaults before reaching that repayment threshold.

First, you can ask your lender to cancel your private mortgage insurance after the total of your down payment and your principal pay-down equals 20 percent of the original loan. If your mortgage payments are current and your financial situation is sound, you have a good chance of success.

The second major way to cancel private mortgage insurance is to wait until you have 22 percent equity in your home, based on your home’s value at the time you took out the loan. If you reach this point, your lender and mortgage insurer are required to automatically cancel your private mortgage insurance, under the Homeowners Protection Act of 1998.

One big catch: your mortgage payments have to be current. And, the federal law on canceling private mortgage insurance only applies to mortgages that closed on or after July 29, 1999, although your state might have additional protections.

You also can ask your lender to cancel your private mortgage insurance earlier if the value of your home has increased. For example, if you made a 10 percent down payment on your home, then renovated the kitchen and increased the home’s value by 10 percent, you may have a case for early private mortgage insurance cancellation. Your lender may ask you to pay for an approved appraiser to confirm the home’s new value.

Legally, mortgage servicers have to provide a number for borrowers to call to inquire about private mortgage insurance rules. Also, you can always call your lender or mortgage servicer to ask about canceling private mortgage insurance once you hit the 20 percent threshold. The phone number should be on your monthly mortgage statement.

The sooner you take that step, the sooner you can start saving the money you have been paying for PMI.