Learn How to Remove Mortgage Insurance and Save Money

Mortgage insurance is a type of insurance that lenders take out to protect themselves. It is often required for borrowers who don’t have a 20% down payment. Mortgage insurance can add a significant amount of money to your monthly mortgage payment, so it’s no surprise that many homeowners want to remove it as soon as possible. Here’s what you need to know about how to remove mortgage insurance.

What is Mortgage Insurance?

Mortgage insurance is a type of insurance that is often required by lenders for homebuyers who don’t put down a 20% down payment. The purpose of mortgage insurance is to protect the lender if the borrower defaults on their mortgage. Mortgage insurance can come in different forms, including private mortgage insurance (PMI), Department of Veterans Affairs (VA) mortgage insurance, and Federal Housing Administration (FHA) mortgage insurance.

If you’re a homeowner with mortgage insurance, it’s likely that you’re paying hundreds of dollars every month for it. This can add up to a significant amount of money over the life of your mortgage, so many homeowners want to remove it as soon as possible.

When can you remove Mortgage Insurance?

The rules for when you can remove mortgage insurance depend on the type of mortgage insurance you have and the specific terms of your mortgage agreement. In general, however, there are a few common ways to remove mortgage insurance:

  • Pay down your mortgage to 80% or less of your home’s original value
  • Make improvements to your home that increase its value
  • Refinance your mortgage

If you have private mortgage insurance (PMI), you can request to have it removed once you have paid down your mortgage to 80% or less of your home’s original value. This is done by requesting a new appraisal of your home to confirm its current value.

For FHA loans, mortgage insurance is required for the life of the loan if you put less than 10% down at the time of purchase. If you put down more than 10%, you can request to have the mortgage insurance removed once you’ve paid down your mortgage to 78% or less of your home’s original value.

How to Remove PMI

If you have private mortgage insurance (PMI), you can request to have it removed once you have paid down your mortgage to 80% or less of your home’s original value. Here’s how to do it:

  • Contact your lender and request to have your PMI removed.
  • Your lender will likely require a new appraisal of your home to confirm its current value.
  • If your home’s value has increased enough that your mortgage is now at 80% or less of its original value, your lender will remove your PMI.

Keep in mind that you may need to pay for the new appraisal and that the process can take several weeks to complete.

How to Remove FHA Mortgage Insurance

If you have an FHA loan, mortgage insurance is required for the life of the loan if you put less than 10% down at the time of purchase. If you put down more than 10%, you can request to have the mortgage insurance removed once you’ve paid down your mortgage to 78% or less of your home’s original value. Here’s how to do it:

  • Contact your lender and request to have your FHA mortgage insurance removed.
  • Your lender will likely require a new appraisal of your home to confirm its current value.
  • If your home’s value has increased enough that your mortgage is now at 78% or less of its original value, your lender will remove your FHA mortgage insurance.

Keep in mind that even if you reach the 78% threshold, you may still have to wait until your mortgage reaches a certain age before the mortgage insurance can be removed. This varies depending on the specific terms of your FHA loan.

Refinancing to Remove Mortgage Insurance

If you’re having difficulty removing mortgage insurance through the methods outlined above, you may want to consider refinancing your mortgage. This involves taking out a new mortgage to replace your existing one.

Refinancing can be a good option if interest rates have dropped since you took out your original mortgage. This can save you money on your monthly mortgage payments and can also help you remove mortgage insurance if you have been unable to do so through other methods.

Conclusion

Mortgage insurance can add a significant amount of money to your monthly mortgage payment, so it’s no surprise that many homeowners want to remove it as soon as possible. While the rules for removing mortgage insurance depend on the type of insurance you have and the specific terms of your mortgage agreement, there are ways to remove it. Paying down your mortgage, making improvements to your home, and refinancing your mortgage are all options to consider if you want to remove mortgage insurance.

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