While lending institutions have been legally required (for loans closed past July 1999) to cancel Private Mortgage Insurance (PMI) at the point the loan balance gets under 78% of the price of purchase, they do not have to cancel PMI automatically if the borrower's equity is more than 22%. (The legal requirment does not apply to some higher risk mortgages.) The good news is that you can cancel your PMI yourself (for a mortgage closing past July '99), without considering the original price of purchase, once the equity rises to twenty percent.
Keep a running total of your principal payments. Also keep track of the price that other homes are selling for in your neighborhood. Unfortunately, if yours is a recent loan - five years or fewer, you probably haven't had a chance to pay a lot of the principal: you have been paying mostly interest.
You can begin the process of PMI cancelation as soon as you're sure your equity has risen to 20%. You will need to call the mortgage lender to alert them that you want to cancel PMI payments. The lending institution will ask for documentation that your equity is high enough. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.
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