Since 1999, lending institutions have been obligated to cancel a borrower's Private Mortgage Insurance (PMI) at the point his loan balance (for loans closed after July of that year) reaches less than seventy-eight percent of the purchase price, but not when the borrower's equity reaches more than twenty-two percent. (This legal requirment does not apply to some higher risk mortgages.) But if your equity reaches 20% (regardless of the original price of purchase), you have the legal right to cancel the PMI (for a loan closed after July 1999).
Familiarize yourself with your loan statements to keep your eye on principal payments. Make yourself aware of the purchase prices of other houses in your neighborhood. If your loan is under five years old, probably you haven't greatly reduced principal � it's been mostly interest.
At the point you think you have achieved at least 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you want to cancel PMI payments. Next, you will be required to verify that you have at least 20 percent equity. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and most lending institutions request one before they agree to cancel.
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