Since 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of that year) goes below seventy-eight percent of the price of purchase, but not at the time the borrower's equity climbs to more than twenty-two percent. (Some "higher risk" mortgage loans are not included.) However, if your equity rises to 20% (regardless of the original purchase price), you are able to cancel the PMI (for a loan closed past July 1999).
Study your mortgage statements often. Find out the selling prices of other homes in your immediate area. You are paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal most likely hasn't gone down much.
Once you determine you have achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. First you will tell your lender that you are requesting to cancel your PMI. Your lender will require documentation that your equity is high enough. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.
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