End Mortgage Insurance
Frequently Asked Questions
What is Mortgage Insurance?
Mortgage insurance is a type of insurance policy that protects a mortgage lender if a borrower fails to make their payments. While mortgage insurance is designed to protect the lender, this reduced risk allows lenders to offer loans to borrowers who otherwise wouldn’t qualify for a mortgage at all, let alone an affordable one.
When is mortgage insurance required?
The requirement for mortgage insurance depends upon down payment and/or existing home equity, credit scores, and loan type.
Lenders traditionally require a down payment of 20% or more as a condition of qualifying for a mortgage without mortgage insurance.
Note that conventional loan borrowers with lower down payments pay private mortgage insurance (PMI) while borrowers who get a loan backed by the Federal Housing Administration (FHA) pay a mortgage insurance premium (MIP).
How do I eliminate or remove PMI Insurance?
Per HPA guidelines, you have the right to request that your mortgage servicer cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80% of the original value of your home. Even if you don’t ask your servicer to cancel PMI, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home.
Note: The rights in the Homeowners Protection Act apply to mortgages related to single-family principal residences that closed on or after July 29, 1999
How do I eliminate or remove MIP insurance?
Unlike conventional loans, FHA loans come with mandatory mortgage insurance regardless of the amount of your down payment, and canceling it can be challenging. If you fall into a category where your MIP cannot be cancelled and you have more than 20% equity in your home, you have the option of refinancing your home with a conventional mortgage and eliminating mortgage insurance.
FHA Guidelines for MIP mortgage insurance:
- July 1991-December 2000: If your origination date falls between these two markers, you can’t cancel your FHA mortgage insurance premiums.
- January 2001-June 3, 2013: Your MIP will be canceled once you reach a loan-to-value ratio (LTV) of 78 percent.
- June 3, 2013-present: Your MIP will only be canceled once your mortgage is paid in full, unless you made a down payment of at least 10 percent. If so, your MIP will be canceled after 11 years.