For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not when the loan reaches 22 percent equity. (Some "higher risk" morgages are excluded.) But if your equity rises to 20% (no matter what the original price was), you can cancel PMI (for a loan closed after July 1999).
Study your statements often. Also be aware of how much other homes are being sold for in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't gone down much.
At the point your equity has reached the required twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. First you will tell your lender that you are asking to cancel your PMI. Then you will be required to verify that you have at least 20 percent equity. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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