Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans made past July of that year) goes under seventy-eight percent of the purchase price, but not at the time the loan's equity reaches more than twenty-two percent. (Some "higher risk" mortgage loans are excluded.) The good news is that you can request cancelation of your PMI yourself (for a loan closing past July '99), without considering the original price of purchase, at the point the equity gets to twenty percent.
Review your monthly statements often. Also keep track of what other homes are being sold for in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
At the point you think you have achieved at least 20 percent equity, you can start the process of getting PMI out of your budget. You will need to contact your lender to let them know that you wish to cancel PMI. Your lender will require proof that your equity is high enough. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) will be all the proof you need � and your lender will probably request one before they'll cancel PMI.
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