The Marquee Loop: Mortgage Insurance
What is mortgage insurance and what is the best way to remove it?
Mortgage Insurance is required on two types of loans. The first type is called Private Mortgage Insurance (PMI) which is required on any conventional loan where the loan to value (LTV) exceeds 80%. On FHA loans, there are two types of mortgage insurance: upfront mortgage insurance and monthly mortgage insurance. Regardless of the type of mortgage insurance, its purpose is to protect the lender in case of borrower default.
Removing mortgage insurance can be sometimes subjective on a Conventional loan but more rigid on an FHA loan. The rule of thumb for removing PMI from a Conventional loan is for the borrower to wait approximately 2 years from the closing date before they can request the PMI to be dropped from their loan. This request can be granted by their lender once at least 20% equity is achieved on their loan. Removal of PMI on a Conventional loan does not require a refinance. There can be occasional exceptions to this rule that you can discuss with your loan officer.
Removing monthly mortgage insurance on an FHA loan is a more difficult task. A borrower can request the monthly mortgage insurance to be removed but typically has to wait until the loan is seasoned for 10 years. If a borrower qualifies and has at least 20% in their home they can request a refinance into a conventional loan and remove the mortgage insurance immediately.
Contact your Loan Officer with more questions and details regarding Mortgage insurance.
*Marquee Mortgage LLC, is an independent, full service broker specializing in purchase money loans, refinances and creative lending solutions.