Although lenders have been legally obligated (for loans closed after July '99) to cancel Private Mortgage Insurance (PMI) at the time the balance gets below 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is over 22%. (Some "higher risk" loan programs are not included.) However, if your equity reaches 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 mortgage statements to keep track of principal payments. You'll want to stay aware of the the purchase amounts of the houses that sell around you. Unfortunately, if yours is a new mortgage loan - five years or under, you likely haven't been able to pay much of the principal: you have been paying mostly interest.
At the point you think you've achieved at least 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will need to contact the lender to alert them that you wish to cancel PMI. Next, you will be required to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and almost all lending institutions will require one before they'll cancel PMI.
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