How Do I Get Rid of Mortgage Insurance?
You’ve probably heard of private mortgage insurance, or PMI. If you have a conventional loan for your home, PMI is required when you put less than 20% down on your home purchase. On one hand, it’s great because it allows you to put less down up-front and protects the lender if you default on your loan; on the other, it adds a premium to your monthly mortgage payment.
But if you’ve built up your home’s equity, this extra monthly payment can be a thing of the past.
When Can Mortgage Insurance be Removed?
If you’re wondering if you can cancel PMI payments if your home value increases, the answer is yes! The Homeowners Protection Act sets procedures for mortgage insurance removal, giving you the right to remove PMI requirements for your home loan based on your home equity milestones. Luckily, you can get rid of mortgage insurance if you meet any of these requirements:
You’ve Paid Down Your Mortgage
If you’ve maintained good standing with your mortgage payments and haven’t missed any, your PMI will be automatically stopped when your mortgage balance reaches 80%. This is referred to as “automatic termination of PMI.”
“Final termination of PMI” happens when you reach the halfway point of your amortization schedule. For example, 15 years into your 30-year mortgage loan.
It may seem best to figure out how you can get rid of PMI without refinancing, but sometimes it’s the best option. Refinancing when mortgage rates are low could be beneficial if your new mortgage balance is below 80% of your home’s value. This scenario can be especially helpful if you live in an area where the value of homes are increasing.
Just be careful that your home equity hasn’t dropped: you may be required to add PMI back.
If you’ve added features and amenities to your home and live in an area where the housing market is hot, your home may have already reached the 20% equity threshold, which means you can say goodbye to PMI.
Choose Ted Bougie and the BAM Team to Answer all of Your Mortgage Insurance Removal Questions
As leading Minneapolis loan officers, our team of experts can help you choose the best loan options for you. We can discuss all things PMI, and which mortgage insurance removal tactic is best for your unique situation. Contact us today to get started with Best Advantage Mortgage.