While lending institutions have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance goes below 78% of the purchase price, they do not have to take similar action if the borrower's equity is above 22%. (The legal requirment does not cover a number of higher risk mortgages.) However, you are able to cancel PMI yourself (for mortgage loans closed after July 1999) when your equity gets to 20 percent, regardless of the original purchase price.
Do your homework
Keep a running total of each principal payment. Also be aware of the price that other homes are selling for in your neighborhood. You are paying mostly interest if you closed your loan fewer than 5 years ago, so your principal most likely hasn't lowered much.
You can start the process of canceling PMI when you you think that your equity has risen to 20%. You will first let your lender know that you are requesting to cancel your PMI. Then you will be required to verify that you are eligible to cancel. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for PMI cancellation.
At Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234, we answer questions about PMI every day. Give us a call at 214-663-5355.