Have Mortgage Insurance On Your Loan? Here's How To Get Rid Of It

Posted Oct 14, 2009 @ 2:45 pm, Viewed by 222 Visitors, Read 225 Times.

For those of you who put down less than 20% when you bought your house, you probably have mortgage insurance on your home, and you're probably wondering how you can get rid of it.  It depends on the loan type of loan you have.  If you have a conventional loan, you have to pay down your principal balance to 80% of the value of the house.  For example, if you bought your home for 200,000 and borrowed 190,000 you would need to buy down your principal balance on your mortgage to 180,000 to begin getting rid of your mortgage insurance.  Another option would be for the value in your home to increase (not likely in this market) and make your loan to value ratio less than 80%.  Once one of these milestones are reached you can get in touch with your lender and let them know you've a point in which you will be able get rid of your mortgage insurance.  They will then give you instructions on what documentation to provide to them to get rid of the mortgage insurance.  Most conventional loans do have a 2 year mortgage insurance contract that states regardless of how quickly you pay down your balance, you'll have to keep the MI for a minimum of 2 years.

If you have an FHA loan its a little different.  First, your full upfront mortgage insurance premium you pay at settlement must be depleted, and that takes 5 years.  Next, you have to pay your mortgage balance down to 78% of the original sales price.  It doesn’t matter how much your home appreciates, with an FHA loan you still must reach 78% of the original sales price.  Lastly, when you agree to an FHA loan, you also sign a 7 year monthly mortgage insurance contract.  That too must run out and then your MI will drop off your loan.

The third option is to refinance, if you have the equity, out of your conventional or FHA loan and get rid of the mortgage insurance.  By refinancing you would be able to by pass the contracts you sign at settlement and get rid of MI immediately.  This option is great today because rates are as low as they are.

 

Speak with a loan officer reguarding your mortgage?

More information on mortgage insurance?

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joshp975

joshp975 I've lived in the DC metro area my entire life; growing up in Montgomery County Maryland and attending the University of Maryland.  I now live in Arlington, Virginia.  Living all around the DC area has given me a great understanding of the real estate market.  After graduating from the University of Maryland, I worked as a loan officer in Gaithersburg for three years.  I then opened my own mortgage brokerage company, which I ran and operated successfully for several years before agreeing to a buyout by my partner.  Now, I have found a home at Choice Finance where I am able to grow professionally and better serve my clients. My experience has helped me refine my business techniques and find my niche in the FHA Jumbo Market.  It has also enabled many clients to take advantage of this program, which in turn lowered intrest rates and saved them money.  My combination of experience and know-how has lead me to become a great resource for my clients and enabled them to achieve their dream of homeownership. Read More

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