Canceling Private Mortgage Insurance

While lenders have been legally obligated (for loans closed after July 1999) to cancel Private Mortgage Insurance (PMI) at the point the mortgage balance gets under 78% of the purchase price, they do not have to cancel automatically if the equity is over 22%. (A number of "higher risk" morgages are excluded.) However, you can actually cancel PMI yourself (for mortgage loans made after July 1999) when your equity gets to 20 percent, regardless of the original price of purchase.

Verify the numbers

Familiarize yourself with your loan statements to keep track of principal payments. Also keep track of what other homes are purchased for in your neighborhood. If your loan is under five years old, probably you haven't greatly reduced principal � it's been mostly interest.

Verify Equity Amount

At the point you think you've reached 20 percent equity, you can begin the process of freeing yourself from PMI payments. You will first notify your lender that you are requesting to cancel PMI. Then you will be asked to submit documentation that you have at least 20 percent equity. Usually lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to verify your home's equity and eligibility for canceling PMI.

Northeast Bancorp of America, Inc. can answer questions about PMI and many others. Give us a call at (440) 234-9660.

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