Make Private Mortgage Insurance a Thing of the Past
For loans made since July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of the purchase amount � but not at the point the borrower earns 22 percent equity. (This legal obligation does not cover certain higher risk mortgages.) But you have the right to cancel PMI yourself (for mortgage loans made after July 1999) once your equity gets to 20 percent, regardless of the original price of purchase.
Do your homework
Familiarize yourself with your loan statements to keep track of principal payments. Also keep track of how much other homes are purchased for in your neighborhood. You've been paying mostly interest if the closing was fewer than 5 years ago, so your principal most likely hasn't been reduced by much.
Proof of Equity
Once your equity has risen to the magic number of twenty percent, you are not far away from getting rid of your PMI payments, once and for all. You will need to call the lender to let them know that you wish to cancel PMI payments. Lenders require proof of eligibility at this point. 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.