Many borrowers who select FHA loans were attracted to the low down payment requirement. Given that PMI is usually required on loans with less than 20% down, most of these borrowers have PMI payments each month. The procedure for cancelling that fee depends on when the mortgage was endorsed by FHA. Below is information on cancelling PMI from FHA home loans endorsed before June 3, 2013.
Cancelling PMI on a Pre-determined Schedule
With every mortgage payment submitted, you pay down a fragment of your principal. In the early several years, the amount for interest is more significant than the that for the loan balance, but this continuously changes. PMI is ultimately cancelled when the principal drops to 78% of the original purchase price. You can also make extra contributions towards principal to get to this point faster.
With most loans, you may request that PMI be cancelled when the balance reaches below 80%. It definitely makes sense to monitor this to save additional money. Refer to your loan documents to verify that this is included.
Increase in Home Values
LTV ratios are based on your principal amount and the purchase price or current property value. If values improve quickly, your loan balance might be lower than 80%, cancelling PMI as a result. You must request an appraisal through your Lender to explore this option. You are invoiced the expense, but it pays for itself if your PMI disappears as a result. Additionally, you must have your loan for 5 or more years to be eligible.
Guidance on Cancelling PMI From FHA Home Loans
Loan programs generally change over the years. The above is purely a summary of common FHA mortgage terms. You must check your particular paperwork regarding cancelling PMI from FHA home loans. You may also contact a lending consultant for additional assistance.