No one likes paying extra money every month on MIPs. The good news is that mortgage insurance premiums don’t last the length of your loan.
Here are three ways to eliminate them and free up some extra cash each month at various stages of your loan.
1. Pay down the balance of your loan.
If you want to get rid of your MIP early, consider paying down the balance of your loan. When your mortgage gets down to 80 percent of the home’s original value, you can apply to have your MIP removed.
Keep in mind, however, that this request is not always approved. Some lenders prefer you’ve been in your home for at least a few years, while others may not approve your request if your home has lost value.
Another way to eliminate your MIP is to refinance your loan. This applies to both conventional and FHA loans. Conventional loan refinancing requires an appraisal, so if the appraisal indicates that you have at least 20% equity in your home, MIP is not required. FHA mortgage insurance premium rates recently decreased, so even if you cannot remove your FHA mortgage insurance premium altogether, you may be eligible to have it significantly reduced by refinancing.
3. Wait for MIP to cancel.
By law, the MIP is automatically cancelled once your loan reaches 78% of its original value. In this case, your lender is required to remove those payments from your mortgage.
The drawback of this is the length of time it typically takes to reach this amount. On average, it can take between 11 and 15 years. If your home ever drops in value, it cold take even longer.
While there are benefits and drawbacks of each option, many mortgage professionals agree that refinancing is one of the best ways to eliminate your MIP. To find out more about your refinance options, call one of NLC Loans’ personal mortgage advisors toll-free today at 1-877-480-8050.