For loans made since July 1999, lenders are obligated (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes lower than 78 percent of the purchase price � but not at the point the loan reaches 22 percent equity. (There are some exceptions -like certain "high risk' loans.) However, if your equity reaches 20% (no matter what the original purchase price was), you can cancel PMI (for a mortgage closed past July 1999).
Keep a running total of payments
Keep track of each principal payment. You'll want to stay aware of the the purchase prices of the houses that are selling in your neighborhood. Unfortunately, if you have a recent mortgage - five years or under, you likely haven't begun to pay a lot of the principal: you are paying mostly interest.
The Proof is in the Appraisal
You can begin the process of canceling your PMI as soon as you calculate that your equity has risen to 20%. You will need to notify your mortgage lender that you wish to cancel PMI. Next, you will be asked to submit documentation that you are eligible to cancel. You can get documentation of your equity by getting a state certified appraisal using form URAR-1004 (Uniform Residential Appraisal Report), which is required by most lenders before canceling PMI.