One drop, as in dropping your monthly mortgage insurance (MI) payment. If you bought or refinanced your home, you may have taken mortgage insurance. Mortgage insurance is generally required when you have less than 20 percent equity in a property. There are many ways of structuring a loan with mortgage insurance, but for simplicity’s sake, we will say there was no up-front mortgage insurance premium paid, and that monthly mortgage insurance is paid in addition to principal and interest. Usually, the first question most borrowers ask about their new mortgage is, “When can I drop my MI?” The when is important, but more importantly is the how, so read below to know when and how to say goodbye to your MI! (I also want to point out that if your property has increased in value, and rates are lower, you may be able to refinance out of your existing mortgage to a lower payment as well.)
Automatic termination of a one-unit principal residence or second home:
A mortgage loan is eligible for automatic termination of Ml based on the scheduled termination date (or the midpoint of the amortization period, as applicable), and the loan value is 78 percent of the original appraised value, and
the borrower’s payments are current.
Borrower-initiated based on the original value of the property on a one-unit principal residence or second home:
Borrower must make a written request to the servicer (termination will not happen automatically).
Loan value must be 80 percent of the original value.
The borrower’s payments are current.
Borrower-initiated termination on a one-unit principal residence or second home:
Borrower must make a written request to the servicer (termination will not happen automatically).
Loan to value is 75 percent or less of original value if the owner has owned the property for two to five years.
The borrower’s payments are current.
Rethink, revisit, reevaluate and… drop your mortgage insurance!
By Carl Edward Guzman
Carl Guzman, NMLS# 65291, CPA, is the founder and president of Greenback Capital Mortgage Corp. He is a residential financing expert and a dealmaker with over 25 years’ experience. Carl and his team will help you get the best mortgage financing for your situation and his advice will save you thousands! www.greenbackcapital.com [email protected]
