Dear Claire: How Do I Cancel Mortgage Insurance?
Unlocking Mortgage Insurance Removal: Your Guide to Lower Costs
A lot of people confuse mortgage insurance with actual homeowner’s insurance. They’re not the same thing. PMI, as it’s referred to, is typically only for the lender. You’re paying the lender an insurance policy in case you default on the loan. The reason why I bring that up is because it’s tied to how much you owe on the loan vs. how much your house is worth. Depending on how much your house is worth vs. how much you owe on the loan, the mortgage insurance might be able to be removed. So that’s the first and most common way to remove your mortgage insurance.
Say I bought my house for $300,000 and it went up significantly. Now it’s worth $500,000, I can ask the lender as long as I paid all of my payments on time, I can say, “Hey lender, can you please remove the mortgage insurance because I think that my value is high enough that you don’t need that mortgage insurance anymore.” If you’re going to do this, call me because you’re going to want comparable properties to give to the appraiser.
They’re going to send out an appraiser to do an appraisal on your property to make sure that what you think is the value is actually the value. That’s the first and most common way that you would get mortgage insurance removed from your loan. We are talking a couple hundred dollars a month sometimes for some loans guys. So this is not a small amount of money. Second, you could refinance your house. That obviously also has to have a high enough value to be able to do that. Because if you’re refinancing to get your mortgage insurance removed, you still have to have a high enough value that you’re going to be at that 20% invested. So meaning you will have at least 20% equity in the value of your home. Those are the two ways. Three, you can make more than your regular payment on the property to reduce your loan. So instead of it having anything to do with the value of the home, it’s going to have to do with the actual loan itself. If you lower the loan amount by enough that your loan is now — below 80% of the value of your home, then the lender will remove it as well. You still have to petition; they’re still going to do an appraisal. Likely that would be somewhere where you ended up putting way more towards your principal on the loan than you normally would have.
Or you can just wait, if you just keep making those payments and that money just keeps going to that mortgage insurance, eventually over time once you hit that 78% of loan to value then the mortgage insurance will just drop off automatically. Things you should know, it doesn’t cover you at all. It’s only a policy again for the lender just to be sure this isn’t for your homeowner’s insurance or this isn’t going to cover you if something happens to the house in a flood or anything like that. Not at all and what we’re talking about right now are conventional mortgage insurance that is not FHA. FHA has a completely different mortgage insurance policy that you cannot get removed. So if you have an FHA loan, the only way to get your mortgage insurance taken off of it is if it’s refinanced.
Of course, if you have any questions about all of this, give me a call. I’m happy to walk through your policies with you and look at your statement. That’s probably the easiest way to see what you’re paying in mortgage insurance and see if it’s worthwhile to petition to have it removed and we have had prices going up pretty significantly. So, you very well may be in a position that you could have the mortgage insurance taken off. I hope you enjoy the rest of your day, and thank you so much for tuning in. Please remember to subscribe to our Paris Group Realty YouTube channel, where we have all kinds of more information than we have here. Have a great day. Take Care.
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