While lending institutions have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the balance goes under 78% of the price of purchase, they do not have to cancel PMI automatically if the equity is more than 22%. (A number of "higher risk" loan programs are excluded.) The good news is that you can request cancelation of your PMI yourself (for a mortgage loan that closed past July '99), regardless of the original purchase price, when the equity gets to twenty percent.
Keep track of payments
Familiarize yourself with your loan statements to keep track of principal payments. You'll want to stay aware of the the purchase prices of the homes that sell around you. You've been paying mostly interest if your loan closed fewer than 5 years ago, so your principal most likely hasn't lowered much.
Proof of Equity
When you find you have reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will need to contact the lending institution to alert them that you want to cancel PMI payments. The lending institution will ask for proof that your equity is at 20 percent or above. Usually lenders ask for a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your equity and eligibility for PMI cancellation.