Canceling Private Mortgage Insurance
Since 1999, lenders have been legally required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for loans closed after July of '99) goes down below seventy-eight percent of the purchase price, but not at the time the loan's equity reaches twenty-two percent or higher. (There are some exceptions -like some "high risk' loans.) The good news is that you can request cancelation of your PMI yourself (for a loan closing after July '99), no matter the original purchase price, at the point the equity gets to twenty percent.
Do your homework
Keep a running total of each principal payment. You'll want to be aware of the prices of the homes that sell around you. Unfortunately, if yours is a new mortgage - five years or fewer, you likely haven't begun to pay much of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
Once your equity has reached the required twenty percent, you are close to canceling your PMI payments, for the life of your loan. Call your mortgage lender to ask for cancellation of PMI. Lenders request proof of eligibility at this point. You can get documentation of your home's equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lending institutions before canceling PMI.