For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase price � but not when the borrower earns 22 percent equity. (Certain "higher risk" mortgage loans are excluded.) But if your equity reaches 20% (no matter what the original purchase price was), you are able to cancel your PMI (for a mortgage loan closed past July 1999).
Review your loan statements often. Also keep track of how much other homes are selling for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal probably hasn't lowered much.
At the point you determine you've reached 20 percent equity in your home, you can start the process of getting PMI out of your budget. Call your mortgage lender to ask for cancellation of your PMI. Then you will be required to submit proof that you are eligible to cancel. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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