Canceling Mortgage Insurance
If you have enough equity in your primary home and made your mortgage payments on time, cancelling your mortgage insurance is a simple process.
Cancellation based on original value.
According to the Homeowners Protection Act (HPA), you can ask your lender to cancel mortgage insurance when your mortgage balance reaches 80% of your home’s original value, either because:
a. You’ve made all of your scheduled payments
b. You’ve made extra payments to reduce the principal balance ahead of schedule
In addition to your good payment history, your request must be in writing, your property value must be at least the same as its original value and there can’t be any subordinate liens on your property.
If you meet these requirements, your lender must cancel the mortgage insurance on your loan.
Cancellation based on current value.
You can also ask your lender to cancel mortgage insurance based on your equity due to your home’s value appreciating. (This scenario is not covered under the HPA, and lender/investor requirements may vary.) In addition to your good payment history, your lender will usually require an appraisal to verify your home’s value.
If your mortgage is at least 2 years old but less than 5, you generally need at least 25% equity in your home. If your mortgage is more than 5 years old, you typically need at least 20% equity.
Automatic cancellation — no asking required!
Under the HPA, your lender must cancel mortgage insurance on your loan (with certain exceptions) when:
a. You reach 22% equity in your home based on the original property value and
b. Your mortgage payments are current.
Thank you Shawna Clough with Evergreen Home Loans for providing us with the content of this email.
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