Eliminating Private Mortgage Insurance

For loans made after July 1999, conventional lenders are required by federal law to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase price — not when you achieve 22 percent equity, which will happen much more quickly with rising property values. (Certain "higher risk" loans are excluded.) But you have the right to request cancellation of PMI (for loans made after July 1999) on conventional loans once your loan balance reaches 20 percent of your purchase price, provided your mortgage payments are current. Some lenders may also allow cancellation of PMI on conventional loans once 20 percent equity is achieved, regardless of purchase price, provided the mortgage is current and has been for the last 12 consecutive months.

Keep track of your principal payments. Also keep track of what other homes are selling for in your neighborhood. If your loan is under five years old, chances are you haven't paid down much principal — it's been mostly interest. But property values in many parts of the country have gone through the roof lately. And that can earn you 20 percent equity even if you haven't paid down much principal.