When Can Mortgage Insurance Be Cancelled?

By
Mortgage and Lending with The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. NMLS #241555

We are often asked when a borrower is no longer required to pay mortgage insurance.  For a conventional (non-government) loan, a borrower can request that the mortgage insurance (MI) premiums be cancelled when they have 20% equity in the property. 

If a borrower requests the cancellation, then they have to prove that they actually do have 20% equity.  That means they will need to pay for an appraisal.  They also need to have a good payment history (no 30-day lates in the past 12 months, and no 60-day lates in the past 24 months).  

The lender is required to cancel the MI once the equity gets to 22%.  They will use the amortization schedule for the loan to determine when the borrower has 22% equity.  

If the borrower has purchased a house at a below-market price and has an appraisal showing that they have 20% equity, they will still probably have to pay MI for at least a year.  That determination is up to the lender.  

FHA rules are a little different.  For an FHA loan, the MI gets cancelled once the borrower has 22% equity.  However, regardless of the equity, a borrower must pay MI for a minimum of 5 years with an FHA loan.  This is one reason it makes no sense for a borrower to get an FHA loan if they are making a large down payment (15% or more).

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Lending / Financial
Location:
Colorado
Tags:
pmi
mortgage tips
mi

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainer
76,071
Melissa Breeland
Residential Mortgage of SC - Charleston, SC

I'm actually finding more and more people choosing FHA even with a large down payment simple because qualifying is so much easier. So, if they are putting down at least 15% and their credit scores are 740 or above it makes no sense to go FHA.  

Feb 03, 2009 07:28 AM #1
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
130,095

Chris Thomas

Ask me a question
*
*
*
*
Spam prevention

Additional Information