Removing Mortgage Insurance From FHA Home Loans Issued Prior To June 3, 2013

Many home buyers who obtain FHA loans were persuaded by the ability to provide a low down payment. Since mortgage insurance is often assessed on mortgages with less than 20% down, most FHA home buyers have mortgage insurance payments with their monthly payment. The procedure for removing that fee depends on when the mortgage was issued by FHA. The following details on removing mortgage insurance from FHA home loans issued prior to June 3, 2013.

Removing Mortgage Insurance on a Set Schedule

With every monthly payment that you remit, you pay down a fraction of your loan. In the early several years, the amount for interest is more significant than the amount towards the loan balance, but this eventually shifts. Mortgage insurance is eventually terminated when the principal is paid down to 78% of the initial purchase price. You can also submit extra payments to principal to get to this milestone sooner.

With most mortgages, you can ask that mortgage insurance be removed when the loan reaches below 80%. It certainly makes sense to track this to save on mortgage insurance fees for several more months. Refer to your loan paperwork to see if this is indeed an option.

Improvement in Market Values

Loan-to-value percentages are calculated using your mortgage balance and the purchase price or current market value. If prices improve enough, your current balance could be lower than 80%, which could remove your mortgage insurance. In order to remove mortgage insurance using this procedure, you must call your Mortgage company to order an appraisal. You are invoiced the fee, but it pays for itself if your mortgage insurance is eliminated as a result. Additionally, you must hold your mortgage for 5 or more years to qualify.

More on Removing Mortgage Insurance From FHA Home Loans

Loan programs generally change over time. The above is strictly a review of common FHA mortgage terms. You should review your specific paperwork regarding removing mortgage insurance from FHA home loans. You can also reach out to your mortgage officer for more information.