While lenders have been required (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance dips under 78% of the purchase price, they do not have to cancel PMI automatically if the loan's equity is over 22%. (The law does not apply to some higher risk mortgages.) However, you have the right to cancel PMI yourself (for mortgage loans closed past July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Analyze your statements often. Also stay aware of how much other homes are selling for in your neighborhood. If your mortgage is under five years old, chances are you haven't paid down much principal � you have been paying mostly interest.
Once you think you've achieved at least 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments. You will need to contact the mortgage lender to alert them that you wish to cancel PMI payments. Next, you will be required to submit proof that you are eligible to cancel. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and your lender will probably require one before they agree to cancel.
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