Mortgage insurance is needed usually when a person cannot come up with at least 20 percent of the sale price of the home as a down payment. This is a huge amount of money, more than many people have on hand so most of us end up with this mortgage insurance. You should not have to pay this insurance forever though. Once you get 20 percent equity in your home through your monthly payments then there is no longer a need to you to have this insurance. The only exception to this is with an FHA loan, if you have one of these types of mortgage then you will have to always pay this mortgage insurance. It is the responsibility of the lender to let you know exactly when you can stop paying mortgage insurance. It is not hard to do the math in order to work out when you will come up on 20 percent equity and this is part of their job. It is actually their job to cancel the mortgage insurance for the borrower but you should still make sure that this is done when it is supposed to be. You also have the right to have your mortgage lender send you information about who it is you should contact if and when you have any problems concerning your mortgage. This info should come with your yearly statement. In cases where a high risk borrower is being lent money then the lender can have this person make mortgage insurance payments until the balance gets as low as 50 percent of the value of the home. This group of borrowers is for those who have a habit of defaulting on mortgage payment. As long as you always pay your payments on time each month and each year you should not have a problem getting your mortgage canceled much sooner than this. As long as you have at least 20 percent equity in your home getting your insurance canceled should be a cinch. If your lender is not willing to work with you on this point then refinance and work with a more flexible lender. Chances are that the new lender won't require you to have this insurance at all. Watch out for high refinancing fees though as you do not want all of the money that you would save getting eaten up by fees. If you want to stop paying your mortgage insurance but the lender is leery of doing this then consider getting a new appraisal. This might convince the lender that you actually have more equity in the home that they thought. These appraisals are not free though, they will cost you a few hundred dollars. Prepaying on your loan can make a big difference in your monthly payments and in the amount of equity that you have in your home as well. Even just a few dollars a month can make a huge difference. And remodeling can boost the worth of your home enormously. Once you have upped the value of your home the lender can reassess your loan to value ratio. |
