If you are a responsible borrower, you should stay alert to drop your private mortgage insurance (PMI) whenever you have a chance. If your house appreciates and your equity reaches 20% of the house value, you can request your lender to drop the coverage and save yourself hundreds of dollars a month.

People used to have a devil of a time getting lenders to drop coverage. But that changed seven years ago. You must be up-to-date on your house payments and have no other loans on the house. Also, the lender must be satisfied the property's value has not declined. But otherwise, coverage must be canceled.

Under the law, the lender must cancel coverage at the borrower's request when the loan is paid down to 80% of the property's original value. But if you forget to ask, policies must be terminated automatically when the loan balance reaches 78% of the home's value at the time it was purchased.

Again, your payments must be current. But even if they aren't, coverage must be dropped when you catch up. And you don't have to lift a finger. Cancellation is supposed to be automatic.
However, under rules adopted by Fannie Mae and Freddie Mac, the two giant financial institutions which keep the vaults of many local lenders fresh with cash for home loans, you can end coverage based on your home's current value as opposed to its original value. That's a huge difference.