Since July 1999, lending institutions are obligated by federal law to automatically cancel Private Mortgage Insurance (PMI) when the loan balance goes under 78 percent of the purchase price - but not at the point the loan reaches 22 percent equity. (A number of "higher risk" mortgages are not included.) The good news is that you can request cancellation of your PMI yourself (for a mortgage loan that closed past July '99), without considering the original price of purchase, after the equity rises to twenty percent.

Keep a running total of payments

Keep track of money going toward the principal. Also, stay aware of the price that other homes are purchased for in your neighborhood. You are paying mostly interest if your mortgage closed fewer than 5 years ago, so your principal probably hasn't lowered much.

The Proof is in the Appraisal

As soon as your equity has risen to the desired twenty percent, you are not far away from canceling your PMI payments, for the life of your loan. First, you will notify your lender that you are requesting to cancel your PMI. Next, you will be asked to verify that you are eligible to cancel. 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.