When purchasing a home, unless you provide a 20% down payment on a conventional loan, you will generally have a loan with some sort of mortgage insurance.
If you currently have a loan with mortgage insurance, there are options to remove your mortgage insurance and we will discuss them in this article. We will break down the options below based on the different options for Conventional and FHA loans (VA loans never have mortgage insurance).
Conventional Loans:
If you have a conventional loan with 20% equity in it and still have mortgage insurance on your home loan, you can reach out to your existing loan servicer and ask them to remove your mortgage insurance. Your existing servicer may require an appraisal to ensure the equity is there in your property to remove the mortgage insurance.
In addition, you may also want to reach out to a mortgage lender as well, to make sure your existing loan is providing you the best interest rate and term for your specific situation, as the mortgage insurance can also be simply removed through a refinance.
If you have less than 20% equity, you may still be able to remove mortgage insurance through a refinance as well. Mortgage insurance is rated in 5% increments, in that the most expensive mortgage insurance costs occur when you have 5% equity in your home, then the cost decreases when you have 10% equity, then again at 15% equity and goes away at 20%.
If you for instance purchased a home with a 5% down payment and now think you may have 10% equity, then you may want to refinance to lower your mortgage insurance or have your lender look into lender paid mortgage insurance which will eliminate your monthly mortgage insurance payment.
FHA Loans:
If your current FHA loan was taken out prior to June 2013, then you may be able to have your FHA mortgage insurance once you have had your FHA loan for five years and paid your loan balance down to 78% of the most recent appraised value of your home (the value when you took out your current home loan).
For everyone else with an FHA home loan, the only way to get rid of mortgage insurance is to refinance to a conventional home loan. The good news however, is that the same rules apply as listed above, in that you don’t necessarily need 20% equity to remove or reduce your monthly mortgage insurance payment.
As always, it makes sense to speak to a licensed lender, such as Strategic Mortgage to fully qualify and see what home loan options are available to meet your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
Strategic Mortgage, LLC – AZBK#0909514 - NMLS#158804 - Equal Housing Lender
Vasilios Kamboukos – NMLS#160440
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