While lenders have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance goes under 78% of the price of purchase, they do not have to cancel PMI automatically if the loan's equity is above 22%. (Some "higher risk" mortgage loans are not included.) The good news is that you can cancel your PMI yourself (for your mortgage closing after July '99), without considering the original purchase price, when the equity gets to twenty percent.
Analyze your mortgage statements often. Also be aware of the price that other homes are selling for in your neighborhood. Unfortunately, if you have a new mortgage loan - five years or under, you likely haven't begun to pay a lot of the principal: you are paying mostly interest.
When you find you have achieved at least 20 percent equity in your home, you can start the process of getting PMI out of your budget. First you will tell your lender that you are requesting to cancel your PMI. Next, you will be required to submit documentation that you have at least 20 percent equity. The best proof there is can be found in a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.
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