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 you 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
  • Loan To Value based upon ORIGINAL VALUE
  • Based SOLELY on regular amortization ( not prepayment of principal )
  • Mortgage payment must be current

You Request Mortgage Insurance be Deleted

  • Mortgage balance is reduced to 78% Loan To Value
  • 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 mortgage insurance premium ) if closed on January 1,2001 and after, MIP will automatically terminate 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 appraised value, MIP will be terminated at 78%
  • 5-year minimum payment waived
  • if original loan amount is 90% or less, or the original appraisal value, NO monthly MIP was charged

SPECIAL NOTES:

  • Loan to Value for purchases based on the lower of the sales price or appraised value
  • Loan to value for refinances based on appraisal value
  • Loan to value figured on base loan amount WITHOUT the upfront mortgage insurance for FHA loans

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