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Can I Cancel My Mortgage Insurance?

Posted by anand@lenders.com on January 7, 2016
| 0

Can I cancel my mortgage insurance is a common question.  Saving the extra monthly payment can be a wonderful feeling. But one thing that can make it difficult is trying to figure out whether you can and how you can cancel your PMI (private mortgage insurance).  Fret not, we got this. Happy Learning!

 


No Cancellation:

For conventional loans, if your loan closed on or after June 3, 2013 and you paid less then 10% on your down payment, then you cannot cancel your MIP.

For FHA loans, if your loan closed on or after June 3, 2013, and you paid less then 10% on your down payment, then you cannot cancel your MIP.

 


Automatic Cancellation:

For conventional loans, if your residence is your single-family primary home or second home, then your mortgage insurance will automatically cancel, whichever happens first:

  • Your LTV (loan-to-value) reaches 78% (and you did not make extra payments to get it to 78%)
  • You reach the midpoint of your mortgage term (for example 7.5 years on a 15 year fixed loan)

* The automatic cancellation requires you to be current on your payments.

For conventional loans, if your residence is a multi-unit primary residence or investment property and if your loan is with Fannie Mae, then your mortgage insurance will automatically cancel when you reach the midpoint of your mortgage term (for example 7.5 years on a 15 year fixed loan).  Freddie Mac does not automatically cancel your mortgage insurance.

For FHA loans, if your loan closed on or after June 3, 2o13, and you paid 10% or more on your down payment, then your mortgage insurance will automatically cancel after it has been collected for 11 years.

For FHA Loans, if your loan closed before June 3, 2013, and your original loan term is 15 years, then your mortgage insurance will automatically cancel when your LTV reaches 78%.  For original loan terms other than 15 years, your mortgage insurance will automatically cancel when your LTV reaches 78% and you have paid mortgage insurance for at least 5 years.

 


Request Cancellation:

For conventional loans, if your residence is your single-family primary home or second home and if you have made enough payments that your LTV reaches 80%, then you can request cancellation.

For conventional loans, if your residence is a multi-unit primary residence or investment property and if your loan is with Fannie Mae and if you have made enough payments that your LTV reaches 70%, then you can request cancellation.  Freddie Mac requires your LTV to reach 65%.

* For a request cancellation, you cannot have had a 30-day late payment in the last year and you cannot have had payments more than 60 days late in the last 2 years.

Make Extra Payments:

For conventional loans, check if your loan is with Fannie Mae or Freddie Mac. If your loan is with Fannie Mae, then you can make extra payments on the loan to get down to 80% faster. If your loan is with Freddie Mac, then you cannot make extra payments on the loan to get down to 80% faster.

Make Home Improvements:

For conventional loans, if you’ve made home improvements to increase your equity by increasing your property value, then Fannie Mae requires that you have 75% or less LTV and Freddie Mac requires 80% LTV to cancel your PMI. All home improvements must be listed in a new appraisal.

Market Value Increases:

For conventional loans, if your market value naturally increases in property value between two and five years after your loan closes, then both Fannie Mae and Freddie Mac require a new appraisal, and the LTV has to be 75% or less. If your cancellation request comes more than five years after your closing, then the LTV can be 80% or less with a new appraisal. The appraisal must be based on a market value increase, not related to home improvements.

For conventional loans, if your residence is a multi-unit primary residence or investment property and if your market value naturally increases in property value after two years after your loan closes, then Fannie Mae requires a new appraisal and the LTV has to be 70% or less. Freddie Mac requires a new appraisal and the LTV has to be 65% or less. The appraisal can be based on a market value increase or home improvements.

 


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