Mortgage insurance is common for most borrowers who finance real estate purchases with less than a 20% down payment, as it is often required when the down payment falls below this threshold. It is also known as Private Mortgage Insurance (PMI).
Conventional Loans (Private Mortgage Insurance or PMI)
If you have a conventional loan and put down less than 20% when you bought your home, you probably have PMI. Here’s how to remove it:
- Automatic Removal: Your loan servicer can cancel the PMI payment when your loan balance drops to 78% of the home’s original value.
- Request Early Removal: You can ask your mortgage loan servicer to remove it when your balance hits 80% of the home’s current market value. This can happen faster if you make extra payments toward your principal or if your home’s value has increased. The loan servicer may require an appraisal to be completed in order to formalize the value of your home.
FHA Loans
If your down payment is under 10%, mortgage insurance never goes away unless you refinance into a conventional loan with enough equity. If you put down 10% or more, MIP automatically ends after 11 years.
VA Loans
VA Loans do not require monthly mortgage insurance. Instead, there’s a one-time funding fee you pay when you get the loan (which can be rolled into the loan amount). After that, there’s no ongoing monthly mortgage insurance cost—just your regular mortgage payment.
How to Remove Mortgage Insurance Faster
- Make extra principal payments, meaning pay more than your regular monthly amount so that the extra goes straight toward principal, not interest. Adding even just an extra $50–$100 a month can lower your balance faster, reduce the total interest you pay, and help you build enough equity to remove mortgage insurance sooner.
- If your home’s value has gone up a lot, refinancing might remove mortgage insurance and lower your interest rate.
- Upgrades can help in an appraisal to increase your property value
Sometimes the quickest way to remove mortgage insurance is to refinance the loan. By doing this, you are able to take advantage of the market value of your home.
If you have further questions, give us a call at (760) 930-0569 to speak with one of our Mortgage Loan Originators. We’re here to discuss your goals and help you find the loan program that best suits your needs.
