Is It Time to Cancel the Mortgage Insurance?
Mortgage insurance benefits the lender if a borrower with less than a 20% down payment defaults on their loan. Most conventional mortgages greater than 80% and all FHA loans require the borrower to have this coverage. Private mortgage insurance on conventional loans can range from 0.5% to 2.25% based on the loan-to-value and the credit […]
Is It Time to Cancel the Mortgage Insurance?
Mortgage insurance benefits the lender if a borrower with less than a 20% down payment defaults on their loan. Most conventional mortgages greater than 80% and all FHA loans require the borrower to have this coverage. Private mortgage insurance on conventional loans can range from 0.5% to 2.25% based on the loan-to-value and the credit […]

4Af4vw4OBkawA6H4WjLIbg.jpg

Mortgage insurance benefits the lender if a borrower with less than a 20% down payment defaults on their loan. Most conventional mortgages greater than 80% and all FHA loans require the borrower to have this coverage.

Private mortgage insurance on conventional loans can range from 0.5% to 2.25% based on the loan-to-value and the credit worthiness of the borrower. A $350,000 mortgage would have a monthly mortgage insurance premium of $146 a month at the low-end of the scale and over $600 on the high-end.

You may request that your mortgage servicer cancel the PMI when the principal balance reaches 80% of the original value at the time the loan was made. You should have received a PMI disclosure form when you signed the mortgage documents stating the date. If you have made additional principal contributions, it will accelerate the date.

Other criteria considered to cancel the PMI on your loan is:

  • The request must be in writing.
  • You must be current on your payments with a good payment history.
  • The lender may ask that you certify there are no junior liens in effect.
  • If the lender is concerned that the value has declined, an appraisal may be required to show that it is eligible.

Conventional loans are supposed to remove the mortgage insurance when the unpaid balance is 78% of the original purchase price.

Another possibility is that the lender/servicer must end the PMI the month after you reach the midpoint of your loan’s amortization schedule. For a 30-year loan, it would be after the 180th payment was paid. The borrower must be current on the payments for the termination to occur.

With the rapid appreciation that many homes have enjoyed in recent years, homeowners may be able to refinance their home and if the new mortgage amount is less than 80% of the current appraised value, no mortgage insurance would be required.

The owner would incur the cost of refinancing but eliminate the cost of the mortgage insurance. To calculate the savings, subtract the new principal and interest payment from the old principal and interest with PMI. Then, divide the savings into the cost of refinancing to determine the number of months necessary to recapture the cost.

FHA loans have two types of mortgage insurance premium: up-front and monthly. For loans with FHA case numbers assigned on or after June 3 2013 with LTV% greater than 90%, the MIP will be paid for the entire term of the loan. If that is the case, refinancing on a conventional loan is the only way to eliminate the MIP. For loans with original LTV% less than 90%, the MIP is collected for 11 years until the balance is 78% of the original amount.

When buying a home, purchasers may not have enough resources for a large down payment. It is understandable to use the best mortgage available to buy the home. The next goal should be to manage the mortgage to lower the overall costs. In this article, we explored eliminating the private mortgage insurance.

LIST OF BLOGS

Courts of Fox Mill Homeowners Association

Historical Overview Origins and Development: The Fox Mill area, including the Courts of Fox Mill, began as a rural farmland before the mid-20th century. The transformation into a residential area was part of the post-World War II suburban boom. The specific...

Courts Cluster

Historical Context Fairfax County, named after Thomas Fairfax, 6th Lord Fairfax of Cameron, has a rich history that dates back to its establishment in 1742. The Courts Cluster, located centrally within the county, is named for its proximity to the Fairfax County...

Courts at Riverwind

History of The Courts at Riverwind The Courts at Riverwind is a residential community managed by Flannery Property Management, located in Centreville, Fairfax County, Virginia. While specific historical details about its establishment are not directly available from...

Courtland Park

Historical Background Early Settlement and Development: Fairfax County itself was established in 1742, but the specific area of Courtland Park developed much later. Originally, the land that Courtland Park occupies was part of the vast tracts owned by colonial...

Courtland at Rolling Oaks Homeowners Association

History of Courtland at Rolling Oaks HOA Fairfax County has a storied history dating back to its establishment in 1742, named after Thomas Fairfax, 6th Lord Fairfax of Cameron. The creation of communities like Courtland at Rolling Oaks is a more modern development,...

Courthouse Woods HOA

Historical Background The inception of Courthouse Woods HOA can be traced back to the broader development patterns in Fairfax County during the late 20th century, a period marked by suburban expansion around the nation's capital. Fairfax County has a rich history,...

Courthouse Station Homeowners Association

History of Courthouse Station HOA Fairfax County, established in 1742, has a rich history of community development, with neighborhoods like Courthouse Station emerging as part of its suburban growth. Courthouse Station likely developed during a period when Fairfax...

Courthouse Oaks Homeowners Association

History of Courthouse Oaks HOA: Courthouse Oaks HOA is nestled within Fairfax County, Virginia, an area with a rich history that dates back to its establishment in 1742. The community of Courthouse Oaks, however, represents a more recent chapter in Fairfax County's...

Courthouse Commons HOA

Historical Context Fairfax County, named after Thomas Fairfax, 6th Lord Fairfax of Cameron, has a rich historical tapestry beginning from its establishment in 1742. The area where Courthouse Commons now stands would have seen significant historical events, including...

Court of Chandon HOA

Historical Context Formation and Evolution: The Court of Chandon was established during a period when Fairfax County was rapidly expanding due to suburban sprawl influenced by the proximity to Washington D.C. The HOA likely came into existence in the late 20th...

RECENT POSTS

Courts Cluster

Historical Context Fairfax County, named after Thomas Fairfax, 6th Lord Fairfax of Cameron, has a...

Courts at Riverwind

History of The Courts at Riverwind The Courts at Riverwind is a residential community managed by...

Courtland Park

Historical Background Early Settlement and Development: Fairfax County itself was established in...

Courthouse Woods HOA

Historical Background The inception of Courthouse Woods HOA can be traced back to the broader...

Courthouse Commons HOA

Historical Context Fairfax County, named after Thomas Fairfax, 6th Lord Fairfax of Cameron, has a...

Court of Chandon HOA

Historical Context Formation and Evolution: The Court of Chandon was established during a period...

ABOUT  TWENTY
THREE HOMES

The Twenty Three Homes are one of the premiere real estate groups locally, nationally and internationally, specifically dealing with high-end properties and exclusive clientele. Partner with Keller Williams Twenty Three Homes are full service real estate experts whose clients benefit from the custom tailored, hands on service while receiving all the exclusive amenities and resources of one of the most established and respected firms in the business.

GET IN TOUCH