How soon can I get rid of my Mortgage Insurance?

For our long-time readers, you are aware that the rules in the mortgage and real estate industry are always changing.  Many of the policies and guidelines that were applied several years ago – or even several months ago – have now changed… and will continue to change.  This is the case with regards to the rules dictating the removal of monthly Mortgage Insurance.  The current guidelines are below:

Dropping Conventional Monthly Mortgage Insurance

• Conventional Mortgage Insurance is required for a minimum of two years
• Mortgage Insurance may be removed when the Loan-to-Value (LTV) reaches 78%
• Automatic termination will occur based upon regular amortization – no prepayment of principal
• Borrowers may request termination earlier if additional principal reductions have been made

Dropping FHA Monthly Mortgage Insurance

FHA loans closed prior to January 1, 2001 are NOT eligible for termination of monthly Mortgage Insurance.  If the FHA loan was closed on January 1, 2001 or after, monthly Mortgage Insurance will be automatically terminated under the following conditions:

• Loan terms that are greater than 15 years
  • Monthly Mortgage Insurance is required for a minimum of five years, AND
  • Must have a 78% LTV based upon the original purchase price/appraised value

• Loan terms that are 15 years or less
  • 5-year minimum payment is waived
  • If original LTV is 90.01% or more, Mortgage Insurance will be terminated at 78% LTV
  • If original LTV is 90.00% or less, NO monthly Mortgage Insurance is required

Additional Requirements to Keep in Mind

• There must be a good payment history and the mortgage payments must be current
• Cancelation requests must be submitted in writing
• Appraisal may be required to insure that the value of the home has not dropped below the original value/purchase price
• There must be no second liens or subordinate financing on the property
• LTV for purchases are based upon the sales price or appraisal value, whichever is lower
• LTV for refinances are based on the appraisal value
• LTV for FHA loans is calculated on the ‘base loan amount’ WITHOUT UFMIP