For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls under 78 percent of the purchase price � but not when the loan reaches 22 percent equity. (Some "higher risk" loans are excluded.) However, if your equity reaches 20% (regardless of the original purchase price), you have the legal right to cancel your PMI (for a mortgage that past July 1999).
Familiarize yourself with your monthly statements to keep a running total of principal payments. Pay attention to the selling prices of other houses in your immediate area. If your mortgage is under five years old, it's likely you haven't greatly reduced principal � you have been paying mostly interest.
You can start the process of canceling PMI when you calculate that your equity has reached 20%. First you will let your lender know that you are requesting to cancel your PMI. Your lender will ask for proof that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably require one before they agree to cancel PMI.
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