Goodbye, PMI!
Since 1999, lenders have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his loan balance (for a loan closed past July of '99) reaches less than seventy-eight percent of the purchase price, but not at the time the loan's equity climbs to twenty-two percent or higher. (Certain "higher risk" morgages are not included.) However, if your equity reaches 20% (regardless of the original purchase price), you have the legal right to cancel the PMI (for a loan that after July 1999).
Keep a record of payments
Familiarize yourself with your loan statements to keep a running total of principal payments. Also be aware of the price that other homes are selling for in your neighborhood. If your mortgage is under five years old, it's likely you haven't paid down much principal � it's been mostly interest.
Proof of Equity
You can begin the process of PMI cancelation as soon as you calculate that your equity reaches 20%. You will need to contact the mortgage lender to alert them that you wish to cancel PMI. Lenders ask for documentation verifying your eligibility at this point. A state certified appraisal using the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) is all the proof you need � and your lender will probably require one before they'll cancel PMI.