mortgage insurance

When Can You Cancel Mortgage Insurance?

Mortgage insurance is a type of insurance that protects the lender in case the borrower defaults on their loan. There are two main types of mortgage insurance: private mortgage insurance (PMI) and government-backed mortgage insurance.

When Can I Cancel Mortgage Insurance?

Private Mortgage Insurance (PMI)

  • PMI is typically required for conventional loans with a down payment of less than 20%.
  • PMI can be canceled once the loan-to-value (LTV) ratio reaches 80%.
  • Lenders may have specific requirements for PMI cancellation, such as a minimum credit score or a certain number of on-time payments.

Government-Backed Mortgage Insurance

  • FHA mortgage insurance (MIP) is required for FHA loans.
  • MIP can be canceled after 11 years for loans with a term of 15 years or longer.
  • For FHA loans with a term of less than 15 years, MIP can be canceled after the loan reaches 78% LTV.
  • VA mortgage insurance (funding fee) is required for VA loans.
  • VA funding fee can be canceled after the loan reaches 80% LTV.

Factors To Consider Before Canceling Mortgage Insurance

  • Evaluate your financial situation and determine if you can afford the increased monthly mortgage payments without PMI.
  • Consider the potential impact of canceling PMI on your credit score.
  • Weigh the pros and cons of canceling PMI to make an informed decision.

Steps To Cancel Mortgage Insurance

  1. Contact your lender and request a PMI cancellation form.
  2. Provide the required documentation, such as a recent appraisal or a statement showing your current LTV ratio.
  3. Pay any applicable fees associated with PMI cancellation.
  4. Once your request is processed, your lender will send you a confirmation of PMI cancellation.

Canceling mortgage insurance can save you money on your monthly mortgage payments. However, it is important to carefully consider the factors involved before making a decision. If you are not sure whether or not you should cancel PMI, talk to your lender or a mortgage professional for advice.

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