Goodbye, PMI!

Although lending institutions have been required (for loans closed past July '99) to cancel Private Mortgage Insurance (PMI) at the point the loan balance dips under 78% of the purchase price, they do not have to cancel PMI automatically if the borrower's equity is more than 22%. (There are some exceptions -like some loans considered 'high risk'.) However, if your equity gets to 20% (regardless of the original purchase price), you can cancel PMI (for a mortgage loan closed past July 1999).

Do your homework

Keep track of money going toward the principal. Find out the purchase prices of other houses in your immediate area. Unfortunately, if you have a recent mortgage loan - five years or fewer, you probably haven't begun to pay much of the principal: you are paying mostly interest.

Proof of Equity

You can start the process of PMI cancelation when you're sure your equity has reached 20%. You will need to notify your mortgage lender that you want to cancel PMI. Next, you will be asked to verify that you have at least 20 percent equity. You can get documentation of your equity by getting a state certified appraisal on form URAR-1004 (Uniform Residential Appraisal Report), required by most lenders before canceling PMI.

At Northeast Bancorp of America, Inc., we answer questions about PMI every day. Call us at (440) 234-9660.

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