For loans made after July 1999, lending institutions are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes below 78 percent of the purchase price � but not at the point the borrower earns 22 percent equity. (Certain "higher risk" loans are excluded.) However, if your equity rises to 20% (regardless of the original price of purchase), you are able to cancel PMI (for a loan closed after July 1999).
Review your loan statements often. You'll want to keep track of the the purchase amounts of the homes that are selling in your neighborhood. If your loan is fewer than five years old, it's likely you haven't greatly reduced principal � it's been mostly interest.
Once your equity has risen to the magic number of twenty percent, you are close to stopping your PMI payments, once and for all. You will need to notify your mortgage lender that you want to cancel PMI payments. Then you will be asked to verify that you have at least 20 percent equity. 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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