Modus Mortgage

Remove Mortgage Insurance from Your Mortgage

You are not required to put a down payment of at least 20% on a new house. That’s the good news. However, you’ll be required to pay mortgage insurance if your down payment is less than 20%.  Learn about the elements that influence whether or not you can get rid of your mortgage insurance by reading this post

What Determines Mortgage Insurance Removal?

The Type Of Mortgage Insurance

There are two types of mortgage insurance: private mortgage insurance (PMI) and mortgage insurance premiums (MIP). Conventional loans have PMI, while government-backed loans use MIP. Knowing which type of mortgage insurance you have is key in knowing how to remove it.

Fannie Mae or Freddie Mac?

Determine who your loan investor is. Fannie Mae and Freddie Mac have slightly different standards when it comes to eliminating mortgage insurance. When determining whether or not you qualify for MIP removal, they will consider the age of your loan and the amount of your down payment, among other things.

There are also a variety of qualifying requirements for conventional loans . Below the requirements will be explained. 

Loan-to-Value (LTV) Ratio

The loan-to-value (LTV) ratio is the most important factor in determining whether or not to cancel mortgage insurance. In other words, your LTV is the difference between how much equity you’ve built in your house and how much you still owe on your mortgage.

Property Type

PMI removal is also dependent on the type of property. As a general rule, removing mortgage insurance from a single-family dwelling is less difficult than removing mortgage insurance from a multi-family investment property.

Age Of The Loan

The age of the loan may play a role in whether or not mortgage insurance can be waived in some cases.

Property Improvements

As mentioned above, property value is a factor in determining if your loan is eligible to remove mortgage insurance. In the event that you’ve made significant renovations to your property and the value of your home has increased, you may be eligible to get rid of your mortgage insurance.

How to get rid of Private Mortgage Insurance

  • Make extra payments and request PMI cancelation when your LVT reaches 80%. 
  • If your property value has increased significantly, request a new appraisal and eliminate PMI based on the new valuation.
  • Wait for PMI to drop automatically.
  • Refinance!

How to get rid of Mortgage Insurance Premiums

  • MIP must be paid for the full term on FHA loans with an original LVT ratio greater than 90%. 
  • For LTV ratios that range from 70% to 90%, it must be paid for 11 years.
  • Refinance! When you’ve achieved 80% LVT, you can refinance into a conventional loan.

Mortgage insurance will be required for almost all loan programs that allow less than a 20% down payment on the loan. While it may appear to be a burden, keep in mind that it will allow you to purchase a home much sooner than otherwise. The debt isn’t permanent; you can either pay it off or refinance your way out of it.

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