Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made past July of that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity climbs to twenty-two percent or higher. (Certain "higher risk" loan programs are not included.) However, you are able to cancel PMI yourself (for mortgage loans made after July 1999) at the point your equity reaches 20 percent, regardless of the original purchase price.
Analyze your monthly statements often. Also stay aware of what other homes are being sold for in your neighborhood. Unfortunately, if you have a new loan - five years or under, you likely haven't started to pay very much of the principal: you are paying mostly interest.
When you think you've achieved at least 20 percent equity, you can start the process of freeing yourself from PMI payments. Contact your lending institution to ask for cancellation of your Private Mortgage Insurance. Then you will be asked to verify that you have at least 20 percent equity. 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 lenders before canceling PMI.
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