Canceling Private Mortgage Insurance
Beginning in 1999, lenders have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his mortgage balance (for a loan closed past July of that year) reaches less than seventy-eight percent of the price of purchase, but not at the time the loan's equity climbs to higher than twenty-two percent. (Some "higher risk" mortgage loans are excluded.) The good news is that you can cancel your PMI yourself (for a mortgage closing after July '99), no matter the original purchase price, once your equity rises to twenty percent.
Keep a running total of payments
Study your statements often. Also keep track of how much other homes are selling for in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't had a chance to pay a lot of the principal: you have been paying mostly interest.
The Proof is in the Appraisal
You can begin the process of PMI cancelation at the time you're sure your equity has risen to 20%. First you will notify your lender that you are asking to cancel your PMI. Next, you will be required to verify that you are eligible to cancel. 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.