What is Mortgage Insurance?
Mortgage insurance is a type of insurance that protects the lender in case the borrower defaults on their loan. It is typically required when the borrower puts down less than 20% of the purchase price of the home. The cost of mortgage insurance is usually included in the monthly mortgage payment.
How to Remove Mortgage Insurance
If you have mortgage insurance and want to remove it, there are a few steps you need to take. Here’s what you need to do:
Step 1: Check Your Loan Documents
The first step in removing mortgage insurance is to check your loan documents. You need to find out what type of mortgage insurance you have and when it can be removed. Some types of mortgage insurance can be removed once you reach a certain amount of equity in your home, while others may require you to refinance your loan.
Step 2: Determine Your Home’s Current Value
The next step is to determine your home’s current value. You can do this by getting a professional appraisal or by using online tools to estimate your home’s value. Knowing your home’s value will help you determine how much equity you have in your home.
Step 3: Calculate Your Loan-to-Value Ratio
Once you know your home’s value, you need to calculate your loan-to-value (LTV) ratio. This is the amount of your loan compared to the value of your home. To calculate your LTV ratio, divide your loan amount by your home’s value.
Step 4: Determine if You Have Enough Equity
If your LTV ratio is less than 80%, you may be able to remove your mortgage insurance. This means you have at least 20% equity in your home. If your LTV ratio is higher than 80%, you may need to refinance your loan to remove the mortgage insurance.
Step 5: Contact Your Lender
Once you have determined that you have enough equity to remove your mortgage insurance, you need to contact your lender. They will have specific requirements for removing the insurance, so be sure to follow their instructions carefully.
Step 6: Provide Documentation
Your lender will likely require you to provide documentation to prove that you have enough equity to remove the mortgage insurance. This may include a professional appraisal, proof of payments, and other documents.
Step 7: Wait for Confirmation
After you have provided all the necessary documentation, you will need to wait for confirmation from your lender that the mortgage insurance has been removed. This may take a few weeks, so be patient.
FAQ
Q. How much does mortgage insurance cost?
A. The cost of mortgage insurance varies depending on the type of mortgage and the amount of the loan. It is typically included in the monthly mortgage payment.
Q. Can mortgage insurance be removed?
A. Yes, mortgage insurance can be removed once you have enough equity in your home. This typically requires a loan-to-value ratio of less than 80%.
Q. Do I need a professional appraisal to remove mortgage insurance?
A. It depends on your lender’s requirements. Some lenders may accept online estimates of your home’s value, while others may require a professional appraisal.
Conclusion
Removing mortgage insurance can save you hundreds or even thousands of dollars over the life of your loan. By following the steps outlined in this article and working closely with your lender, you can remove your mortgage insurance and enjoy the benefits of homeownership without the added cost of insurance.