For loans made after July 1999, lenders are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (A number of "higher risk" morgages are excluded.) The good news is that you can cancel your PMI yourself (for a mortgage that closed past July '99), no matter the original price of purchase, after your equity reaches twenty percent.
Keep track of your principal payments. You'll want to keep track of the prices of the houses that sell in your neighborhood. You are paying mostly interest if your closing was fewer than 5 years ago, so your principal probably hasn't gone down much.
You can begin the process of PMI cancelation at the time you determine your equity reaches 20%. Contact your lending institution to ask for cancellation of PMI. Then you will be required to submit proof that you have at least 20 percent equity. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for canceling PMI.
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