Consumer Advice, Mortgage Business

Mortgage Insurance – When Can It Be Cancelled?

If you have a conventional mortgage, and put less than 20% down when you purchased your home (or less than 20% equity when you refinanced your home) your monthly payment includes “mortgage insurance”.

 

Depending on your interest rate, for a 30-year term mortgage and if you put 5% down payment, it will take approximately 11 years to reach 78% loan to value; with 10% down, it will take about 9 years, and with 15% down, 6 years.

 

If you have an FHA mortgage, mortgage insurance is automatically included in your monthly payment. 

 

Both types of loans have certain rules where mortgage insurance must be eliminated after a certain period of time—and under certain conditions. 

 

Dropping Conventional Mortgage Insurance Rules:

 

Automatically Deleted When:

  • Mortgage balance is reduced to 78% LTV
  • LTV based upon ORIGINAL VALUE
  • Based SOLEY on regular amortization (not prepayment of principal)
  • Mortgage payment must be current

 You Request Mortgage Insurance be Deleted

  •  Mortgage Balance is Reduced to 78% LTV
  •  Submit cancellation request in writing
  • Good payment history
  • Current on mortgage payments
  •  Appraisal or Certification that property value has not decreased BELOW the original value
  • No 2nd liens or subordinated loans on property

 

Dropping FHA Mortgage Insurance Premium Rules:

 

If your loan closed PRIOR to January 1, 2001, you are NOT eligible for termination of MIP (monthly insurance premium) if closed on January 1, 2001 and after, MIP will be automatically terminated under the following conditions. 

 

More than 15-year term

 

  • Must pay for 5 years AND
  • 78% LTV based on original LTV

 

15-Year Term or less

  • If original loan amount is 90.01% or more, of the original appraisal value, MIP will be terminated at 78%
  • 5-year minimum payment waived
  • If original loan amount is 90% or less, of the original appraisal value, NO monthly MIP was charged.

 

SPECIAL NOTE: 

 

  1. Loan-to-Value for purchases based on the lower of the sales price or appraisal value 
  2. Loan-to-Value for refinances based on appraisal value
  3. Loan-to-value figured on base loan amount WITHOUT the Upfront Mortgage Insurance for FHA loans.

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