If you’ve kept up with your mortgage payments and built up enough equity, you have a couple options: You can request to cancel mortgage insurance based on your home’s value or just wait for your lender to automatically cancel mortgage insurance.
(Just to be clear, we’re talking about private mortgage insurance. If you have government mortgage insurance through FHA, you cannot cancel it unless your loan has an LTV of 90% and you’ve had it for at least 11 years.)
Once you cancel mortgage insurance, that’s one less monthly expense, and your disposable income gets a nice little bump.
According to the Homeowners Protection Act of 1998 (HPA), you can ask your lender to cancel mortgage insurance when your mortgage balance reaches 80% of your home’s original value, either because:
In addition to your good payment history:
If you meet these requirements, your lender must cancel the mortgage insurance on your loan.
Note: For a purchase transaction, original property value is the lesser of the property sales price and appraised value. For a refinance transaction, original value is the appraised value.
You can also ask your lender to cancel mortgage insurance based on your equity due to your home’s value appreciating. (This scenario is not covered under the HPA, and lender/investor requirements may vary.)
In addition to your good payment history:
Your lender may have additional requirements.
In general, under the HPA, your lender must cancel mortgage insurance on your loan when:
With this option, all you need to do is sit back and relax.