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.
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
Contact your lender and request a PMI cancellation form.
Provide the required documentation, such as a recent appraisal or a statement showing your current LTV ratio.
Pay any applicable fees associated with PMI cancellation.
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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