For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of your purchase amount � but not at the point the borrower earns 22 percent equity. (The law does not cover certain higher risk mortgages.) But if your equity gets to 20% (no matter what the original price was), you have the legal right to cancel the PMI (for a loan that past July 1999).
Keep a running total of each principal payment. Find out the purchase prices of other homes in your neighborhood. Unfortunately, if yours is a new mortgage 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.
At the point you determine you've reached 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to contact your lender to let them know that you wish to cancel PMI payments. Lenders request proof of eligibility at this point. You can get documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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