For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the loan balance gets below 78 percent of the purchase amount � but not at the point the loan reaches 22 percent equity. (There are some loans that are not included -like some "high risk' loans.) However, you have the right to cancel PMI yourself (for mortgages made past July 1999) when your equity gets to 20 percent, no matter the original purchase price.
Verify the numbers
Familiarize yourself with your mortgage statements to keep your eye on principal payments. You'll want to stay aware of the the purchase amounts of the homes that are selling around you. If your loan is under five years old, chances are you haven't made much progress with the principal � it's been mostly interest.
The Proof is in the Appraisal
At the point you determine you've reached 20 percent equity in your home, you can begin the process of canceling your Private Mortgage Insurance. You will first let your lending institution know that you are requesting to cancel PMI. Lenders ask for paperwork verifying your eligibility at this point. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for PMI cancellation.