For loans closed after July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan falls lower than 78 percent of the purchase amount � but not when the borrower earns 22 percent equity. (Certain "higher risk" morgages are not included.) The good news is that you can cancel your PMI yourself (for your loan that closed after July '99), no matter the original price of purchase, at the point your equity reaches twenty percent.
Analyze your mortgage statements often. Also keep track of what other homes are purchased for in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't lowered much.
Once you determine you've achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. Call your mortgage lender to request cancellation of your PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. You can get proof of your home's equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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