For loans closed since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets lower than 78 percent of your purchase price � but not when the loan reaches 22 percent equity. (There are exceptions -like some loans considered 'high risk'.) But if your equity gets to 20% (no matter what the original purchase price was), you are able to cancel PMI (for a mortgage closed past July 1999).
Familiarize yourself with your mortgage statements to keep track of principal payments. You'll want to be aware of the the purchase amounts of the homes that sell in your neighborhood. You've been paying mostly interest if you closed your mortgage loan fewer than 5 years ago, so your principal probably hasn't gone down much.
When you think you've achieved at least 20 percent equity, you can start the process of canceling your Private Mortgage Insurance. First you will let your lender know that you are asking to cancel PMI. Lenders require documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will document your equity amount � and your lender will probably request one before they'll cancel PMI.
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