Since 1999, lending institutions have been legally obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for loans closed after July of that year) reaches less than seventy-eight percent of the price of purchase, but not at the time the borrower's equity reaches over twenty-two percent. (There are some exceptions -like some "high risk' loans.) However, you have the right to cancel PMI yourself (for mortgage loans closed past July 1999) at the point your equity gets to 20 percent, regardless of the original purchase price.
Keep a running total of your principal payments. Also be aware of what other homes are selling for in your neighborhood. You are paying mostly interest if you closed your mortgage fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
Once you determine you've reached 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. You will need to contact your lending institution to let them know that you wish to cancel PMI payments. Lenders request proof of eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and almost all lenders will require one before they'll cancel PMI.
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