Beginning in 1999, lending institutions have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for a loan closed after July of '99) reaches less than seventy-eight percent of the purchase price, but not at the time the borrower's equity gets to twenty-two percent or more. (A number of "higher risk" mortgage loans are not included.) However, you have the right to cancel PMI yourself (for mortgages closed after July 1999) at the point your equity reaches 20 percent, without consideration of the original price of purchase.
Keep track of each principal payment. Also be aware of how much other homes are purchased for in your neighborhood. If your mortgage is under five years old, probably you haven't greatly reduced principal � you have paid mostly interest.
Once your equity has reached the required twenty percent, you are just a few steps away from canceling your PMI payments, once and for all. You will first let your lender know that you are asking to cancel your PMI. The lending institution will ask for documentation that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and most lenders will require one before they'll cancel PMI.
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