Goodbye, PMI!

For loans closed after July 1999, lending institutions are required (by federal law) to automatically cancel Private Mortgage Insurance (PMI) when the balance of the loan goes below 78 percent of the purchase amount � but not at the point the borrower achieves 22 percent equity. (This law does not apply to a number of higher risk mortgages.) The good news is that you can request cancelation of your PMI yourself (for your loan that closed after July '99), without considering the original price of purchase, when your equity gets to twenty percent.

Do your homework

Keep track of money going toward the principal. You'll want to stay aware of the the purchase prices of the houses that are selling around you. If your mortgage is under five years old, probably you haven't made much progress with the principal � it's been mostly interest.

Proof of Equity

Once your equity has reached the magic number of twenty percent, you are close to getting rid of your PMI payments, for the life of your loan. You will first notify your lender that you are asking to cancel PMI. Lending institutions ask for proof of eligibility at this point. A state certified appraisal documented on the appropriate form (URAR-1004 - Uniform Residential Appraisal Report) verifies your equity amount � and almost all lending institutions request one before they agree to cancel PMI.

At Cottingham Mortgage Inc., we answer questions about PMI every day. Call us: (800) 288-9693.

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