Although lenders have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) when the loan balance dips under 78% of the purchase price, they do not have to cancel PMI automatically if the equity is above 22%. (There are some exceptions -like some "high risk' loans.) However, you have the right to cancel PMI yourself (for mortgages closed past July 1999) at the point your equity gets to 20 percent, without consideration of the original price of purchase.
Familiarize yourself with your mortgage statements to keep a running total of principal payments. Make yourself aware of the purchase prices of other houses in your immediate area. You've been paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal most likely hasn't gone down much.
You can begin the process of PMI cancelation at the time you determine your equity has risen to 20%. You will first notify your lender that you are asking to cancel PMI. Lenders ask for paperwork verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lending institutions request one before they agree to cancel PMI.
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