Time To Remove Mortgage Insurance From Your Mortgage?

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Mortgage Insurance Removal – Shawn Realty (Photo by Artem Bali on Pixel)

If you bought a home and put down less than 20% of the purchase price, there’s a good chance that you might be still paying for a monthly mortgage insurance (MI) that can be eliminated. MI usually ranges between $100 and $350 per month* and the savings can be a nice dinner out or another car payment, or just pure money saving!

What is PMI (Private Mortgage Insurance)?
PMI is insurance that protects lenders from the risk of default and foreclosure for conventional loans; for FHA loans, it’s called MIP (Mortgage Insurance Premium). Don’t mix it up with m:i, Mission Impossible. It is possible.

Federal Guideline
The federal guideline is the minimum that the lenders are required to follow; however, according to my local lender source, lenders might be more forgiving than the federal guideline, so you may be able to save on mortgage insurance sooner than you might think. If you think you might fall into one of these scenarios, you should talk to your mortgage servicer and look at your options of eliminating your mortgage insurance for good!

Possible scenarios
1 You believe that you had the mortgage long enough that your loan amount is 80% (or lower) of your original purchase price or appraisal value (whichever is lower). They call it Loan to Value ratio (LTV). For example, your current loan balance is now $320,000 and you bought it for $400,000.
2 You have been paying extra amounts monthly toward the principal over time.
3 You bought a property with more than 10% downpayment a few years ago.
4 Your home value has gone up significantly since you bought. (Ex. Portland home prices appreciated more than 30% in less than 6 years, conservatively speaking). Click here to request a free CMA (Competitive Market Analysis).

Request a Free CMA (Home Value)

*** See below for exclusions.

Steps to remove mortgage insurance
1 Contact your loan servicer and request the mortgage insurance removal process.
2 Follow the lender’s checklist, like filling out some forms.
3 Check to see if there are any automated appraisals that are free and acceptable to the lender. If not, order the appraisal per lender’s guidelines (Average appraisal cost ranges between $400-800 in Portland, Oregon, 2018).
4 Make your home look and smell nice when the appraiser visits.

It may take 20 – 45 days to complete the process, but then you can enjoy your lowered monthly mortgage payment.

Things to consider when shopping for a mortgage and after owning a home
1 First of all, if you can afford to put down 20% when buying a home, do it and ignore this article.
2 Check the mortgage insurance removal policy when shopping for a mortgage.
3 Pay down the principal (even $50/month) that will increase your home equity faster.
4 Check home appreciation once a year with your trusted real estate agent and see if your LTV is less than 80%.
5 Keep up with the monthly mortgage payment to have a good payment history and credit standing.
6 If you are considering home improvement projects, focus on equity improving items (experienced realtors know what adds most value to a home).

Other options
1 If you meet all requirements to remove mortgage insurance and if the lender doesn’t allow the removal, you may file a complaint to the Consumer Financial Protection Bureau: https://www.consumerfinance.gov/complaint/
2 Refinance your property, assuming you want to keep the property long enough to justify the cost and there’s enough equity to avoid the mortgage insurance.
3 Sell your property and upgrade or downgrade.

Mortgage Insurance Link
Homeowners Protection Act (PMI Cancellation Act)

*Based on Portland Oregon Median home price ($400,000, with average credit score, 3-15% downpayment at 4.5% interest rate for 30 year loan).
** Please check with your lenders because there are many variables and different rules about mortgage insurance removal per lenders, per loan programs and your payment history, etc.
*** FHA loan after June 3rd, 2013 with less than 10% downpayment, investment properties, not single family home, late on payment, etc. 

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