Contrary to popular belief, it is no longer possible to get mortgage insurance cancelled simply by having an appraisal done to show you have 20% or more equity in your home.
Congress passed The Homeowners Protection Act of 1998 ("the Act"), which impacts all conventional loans with private mortgage insurance (PMI) and which closed after July 29, 1999. The basic provision is that PMI must be cancelled when the mortgage balance is 78% of the home's ORIGINAL value and monthly mortgage payments are current. There is no longer a provision which allows the cancellation simply based on an increased appraised value.
So, in order to stop paying the PMI you will need to refinance the loan and show, by an appraisal, that you have 20% equity in the home. As has been stated below, you can put down the monies needed to get to 20% equity OR you might be able to lower the PMI premium for each 5% decline in the Loan-to-Value (80.01 to 85.00 is lowest; 85.01 to 90.00 is a bit more; 90.01 to 95.00 is a bit higher; and, finally, 95.01 and up is the highest premium).
Please feel free to contact me, to help with the needed refinancing.
Bill Parker, CPA*