• How To Cancel A "Mortgage Insurance Premium" • |
("MIP" is associated with FHA loans) |
In the past, FHA borrowers have had to pay annual mortgage
insurance premiums throughout the entire life of their mortgages! |
If your loan
closed before January 1, 2001, you
are out of luck!
The only way to remove the mortgage insurance is to pay off the
loan or refinance the mortgage. Sorry, they say "no exceptions!" |
Now, the GOOD
news!! .... |
Effective for all loans closed on
or after January 1,
2001, FHA's
annual mortgage insurance premiums will be automatically canceled
under the following conditions: |
1. For mortgages with terms more than 15 years, the annual mortgage
insurance premiums will be canceled when the loan to value ratio reaches
78%, provided the mortgagor has paid the annual mortgage insurance
premiums for at least five years. |
2. For mortgages with terms 15 years and less and with loan to value ratios
90 percent and greater, the annual mortgage insurance premiums will be
canceled when the loan to value ratio reaches 78 percent, irrespective of
the length of time the mortgagor has paid the annual mortgage premiums. |
3. Mortgages with terms 15 years and less and with loan to value ratios of
89.99% and less will not be charged annual mortgage insurance premiums. |
Although the annual mortgage
insurance premiums will be canceled as
described, the contract of insurance will remain in force for the loan's full
term. This mortgage insurance premium cancellation provision only applies
to loans in the MMI fund. |
FHA will determine when a borrower
has reached the 78% loan to value
ratio based on the lower of the sales price or appraised value at origination.
New appraised values will not be considered. For example, if the lower of
the sales price or the appraised value at origination was $100,000, when
the loan amount reaches $78,000, FHA will no longer collect annual
mortgage insurance premiums on the loan. Cancellation of the annual
mortgage insurance premiums will normally be based on the scheduled
amortization of the loan. |
In cases where the borrower has
made additional principal payments
may request cancellation of his/her mortgage insurance if the loan to
value ratio has reached 78%, has paid mortgage insurance for at least
5 years and has not been delinquent for more than 30 days at anytime
within the prior 12 months. As always, other conditions may apply. |
|
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• How To
Cancel "Private Mortgage Insurance" • |
("PMI"
is associated with "Conventional" financing) |
"Private
Mortgage Insurance" (PMI) can usually be canceled by
the home buyer after a 20 percent equity has been achieved in
the home. Borrowers should contact their servicer to find out the
procedure for canceling mortgage insurance when they think they
have achieved 20 percent equity. The guidelines for canceling
private mortgage insurance are set by the investors! Typically, the
investors will require an appraisal on the property. The loan
servicer can recommend qualified local appraisers. |
- Additional "FHA
Loan" Pages - |
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