For loans made after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan gets below 78 percent of the purchase amount � but not when the loan reaches 22 percent equity. (There are some loans that are not covered by this law -like some loans considered 'high risk'.) But if your equity reaches 20% (no matter what the original purchase price was), you have the legal right to cancel your PMI (for a mortgage loan closed after July 1999).
Keep a record of payments
Keep track of your principal payments. You'll want to stay aware of the the purchase amounts of the houses that sell in your neighborhood. Unfortunately, if you have a new mortgage - five years or fewer, you likely haven't had a chance to pay very much of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
When you determine you have achieved at least 20 percent equity in your home, you can start the process of freeing yourself from PMI payments. First you will notify your lender that you are requesting to cancel your PMI. Lenders ask for documentation verifying your eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is the best proof there is � and almost all lending institutions require one before they'll cancel PMI.