CAN I REMOVE MY MORTGAGE INSURANCE?

If your mortgage insurance has served its purpose and allowed you to make a down payment less than 20 percent of the sales price using a conventional loan, it might be time to remove that mortgage insurance policy. When you went to your initial closing and you needed a mortgage insurance policy, the lender provided you with a document that showed when your mortgage insurance policy would automatically drop without you doing anything. When the mortgage loan amortized down to 78 percent of the original sales price of the home, the lender removed the policy and your overall monthly payments were reduced. Note that FHA loans, which are not conventional mortgages but government-backed, have monthly PMI but cannot be removed throughout the life of the loan.

Getting to the 78 percent threshold however takes a while. Like 11 years or so. That�s a lot of monthly mortgage insurance payments. Here are some ways to get that policy removed sooner rather than having to wait so long.

If your home has increased in value over time and your loan balance is at 80 percent of this new value, you can contact your lender, in writing, asking the policy be removed. The lender can order an internal electronic appraisal or even require an entire field review but if the lender does verify your loan balance is at 80 percent or better than the value, the lender is required to drop mortgage insurance.

You can also accelerate this process by making extra payments, getting the mortgage balance down to the 80 percent mark. As a bonus, if property values have increased and you�ve made extra payments, you�ll get to that 80 percent level sooner. Did you make any significant improvements that increased the value of your home? That, too will help. When making a request to remove mortgage insurance, make sure you�ve made your monthly payments on time as well. That�s a key element when lenders evaluate your request.

Finally, you can remove mortgage insurance on your own by refinancing out of the old mortgage and into a new one. Your lender will order an appraisal as part of the process to verify your loan balance is at or below the required level. But don�t refinance just to remove mortgage insurance as a new loan will require a new set of closing fees. However, if refinancing makes sense regardless of any mortgage insurance premium, you�ll see a double benefit due to the lower monthly payment with a new rate along with the removal of your monthly mortgage insurance payment.

For more information or questions about mortgage loans,
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