While lenders have been legally required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance dips under 78% of the purchase price, they do not have to cancel automatically if the loan's equity is over 22%. (There are some loans that are not covered by this law -like a number of "high risk' loans.) But if your equity gets to 20% (regardless of the original price of purchase), you have the legal right to cancel PMI (for a mortgage closed after July 1999).
Familiarize yourself with your loan statements to keep track of principal payments. Also keep track of what other homes are purchased for in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or fewer, you probably haven't begun to pay very much of the principal: you have been paying mostly interest.
At the point you think you have achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. You will need to notify your mortgage lender that you wish to cancel PMI. Next, 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 using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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