Wednesday, November 6, 2013

When Does Mortgage Insurance Go Away?

We posted this a couple months ago, but there is still a lot of confusion about when mortgage insurance goes away, so we thought it would be a good idea to post it again.

If the loan is a conventional loan (meaning it is NOT an FHA loan), then mortgage insurance goes away once the borrower has 22% equity in the property (based on the purchase price).  

A borrower can request that the mortgage insurance go away if they have 20% equity in the property, but they will need to pay for a new appraisal to prove that they have 20% equity.  The equity in this case is based on the appraised value, not the original purchase price.  The lender does not have to honor the request for the mortgage insurance to go away early, but they usually do.

For FHA loans, the mortgage insurance never goes away if the borrower put less than 10% down, and it goes away after 11 years if they put 10% or more down.  There is no option to get a new appraisal and have the mortgage insurance go away early with FHA loans.

It is important to note that the old rules for FHA mortgage insurance are still in effect for FHA loans that had a case number assigned on or before June 3, 2013.  In that case, the mortgage insurance goes away once the borrower has 22% equity in the property, or after 5 years, whichever is later.

Have questions about anything related to a mortgage?  Give us a call and see why they call us The Mortgage Experts.  

Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!  Call us if you want to use the best lenders in Colorado!  

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By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

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