Mortgage insurance is often a necessary part of securing a loan, especially for those who make a down payment of less than 20%. While it can help you qualify for a mortgage, many homeowners seek to eliminate this added cost as soon as possible. Here’s how you can get rid of mortgage insurance on your loan in the U.S.
The first step in eliminating mortgage insurance is to understand what type you have. There are two main types: Private Mortgage Insurance (PMI) for conventional loans and Mortgage Insurance Premium (MIP) for FHA loans. Knowing which one you have will guide your next steps.
For conventional loans with PMI, one of the most straightforward ways to eliminate mortgage insurance is by reaching 20% equity in your home. You can do this by:
Once you believe you’ve reached at least 20% equity, you can contact your lender to request the removal of PMI.
If you feel that your home has appreciated significantly, you might want to request a home appraisal. This involves hiring a professional appraiser to assess the current value of your home. If the appraisal shows that your home’s value has increased and you have at least 20% equity, you can request the cancellation of PMI.
Another method to remove mortgage insurance is by refinancing your loan. If your home has gained sufficient value and interest rates are favorable, this option can be beneficial. When you refinance, you may opt for a loan that allows you to eliminate mortgage insurance, especially if you have enough equity.
To qualify for mortgage insurance removal, it’s important to maintain a good payment history. Lenders usually require that you have a consistent payment record without any late payments or delinquencies to process such requests successfully.
Different lenders may have specific policies regarding how to remove mortgage insurance. Always consult your loan documents and speak to your lender to understand their procedures and requirements for PMI cancellation.
Be aware that laws can change, affecting mortgage insurance policies. Staying informed about any legislative updates related to mortgage insurance can provide you with additional opportunities for cancellation or refinancing options.
The Homeowners Protection Act (HPA) provides guidelines on when and how PMI can be canceled. Under the HPA, borrowers can request cancellation of PMI once they reach 20% equity based on the original value of the home. Familiarizing yourself with this legislation can empower you in your efforts to remove mortgage insurance.
In summary, getting rid of mortgage insurance can save you hundreds or even thousands of dollars. By understanding your mortgage insurance type, reaching the required equity, requesting appraisals, and exploring refinancing options, you can take significant steps towards removing this financial burden. Always consult your lender for the most accurate information tailored to your specific situation.
