Mortgage insurance is great for helping you purchase a home when having less than 20% to put down, and once you achieve a pre-determined equity level, your lender must cancel coverage – reducing your total monthly mortgage payment!
Under the Federal Homeowners Protection Act, coverage must be cancelled once your balance is scheduled to drop to 78% of the original value of your property. Under the provision, the cancellation occurs automatically – freeing up money that is sure to come in handy every month.
However, you may be able to cancel coverage even earlier – when your loan balance reaches 80% of the original home value. There are other considerations that can affect your ability to cancel MI at 80%, including:
1. Loan payments are not current.
2. You have a history of late or missed payments (a payment more than 30 days late in the past year, or more than 60 days late in the past 2 years).
3. You have insufficient home equity
4. The loan closed before July 29, 1999 (different rules may apply).
5. The loan may be exempt from cancellation laws due to it being a second home or investment property.
6. The MI is lender paid, rather than borrower paid.
TAKE THE FOLLOWING STEPS IF YOU BELIEVE YOU ARE ELIGIBLE TO CANCEL YOUR MORTGAGE INSURANCE:
• Contact your mortgage servicer (the company you send your mortgage payments to) for details on their cancellation requirements. You’ll be asked for your loan number, Social Security Number, and the property address.
• Be prepared for your servicer to request additional information or arrange for an appraisal.
• Make a written request for MI cancellation, and then allow time for your servicer to update you on the status of your request.
Thanks to Todd Pede of First Home Mortgage for contributing this information.
For more information, contact an experienced lender to find out if you qualify for this money saving program.