Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made after July of '99) reaches less than seventy-eight percent of the price of purchase, but not when the borrower's equity reaches over twenty-two percent. (This legal obligation does not include a number of higher risk mortgages.) But if your equity reaches 20% (regardless of the original purchase price), you can cancel the PMI (for a mortgage loan closed after July 1999).
Familiarize yourself with your mortgage statements to keep a running total of principal payments. Also be aware of what other homes are selling for in your neighborhood. Unfortunately, if yours is a recent mortgage - five years or fewer, you probably haven't been able to pay very much of the principal: you have been paying mostly interest.
You can start the process of canceling PMI when you determine your equity has risen to 20%. First you will tell your lender that you are asking to cancel your PMI. Then you will be required to submit proof that you have at least 20 percent equity. You can get proof of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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