For most homebuyers, mortgage insurance doesn’t last forever. Here’s when you can remove it.
For most of us, the answer is no. Eventually, you have the option of removing it. The lone exception, however, is if you used FHA financing and a low down payment for your mortgage. For those homebuyers, their mortgage insurance lasts the entire life of their loan.Verify my mortgage eligibility (Dec 2nd, 2020)
If you purchase your home using Fannie Mae or Freddie Mac, you’ll have private mortgage insurance attached to your loan, and the great thing about this is that it doesn’t last forever. In fact, a lender is required to remove private mortgage insurance coverage once a buyer reaches 78% of the original purchase price.
For example, let’s say you structure your loan so that your down payment is 10%. This is basically another way of saying that you’re borrowing 90% of the home’s purchase price. As you keep submitting your monthly payments, though, you’ll drive that balance down until you hit the 78% mark. At that point, your lender is required to remove your private mortgage insurance.
There’s an opportunity to be had here, as well. You can request the removal of your mortgage insurance once you have 20% equity in the property. This can happen either because you make your monthly payments on time or the market value of your home rises.
In any case, there are plenty of ways you can unlock the benefits of homeownership, so if you have any questions about this or any other real estate topic, don’t hesitate to reach out to me. I’d love to help you.Show me today's rates (Dec 2nd, 2020)