Although lenders have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the time the loan balance dips below 78% of the purchase price, they do not have to take similar action if the equity is more than 22%. (There are some loans that are excluded -like some loans considered 'high risk'.) However, you have the right to cancel PMI yourself (for loans closed after July 1999) once your equity reaches 20 percent, no matter the original price of purchase.
Familiarize yourself with your mortgage statements to keep track of principal payments. Also keep track of what other homes are selling for in your neighborhood. Unfortunately, if yours is a new loan - five years or under, you probably haven't begun to pay a lot of the principal: you are paying mostly interest.
When you think you have reached 20 percent equity, you can begin the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you want to cancel PMI payments. The lending institution will require documentation that your equity is high enough. The best proof there is can be found in a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.
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