Mortgage insurance is often a necessary expense for homeowners who have a conventional loan and a down payment of less than 20%. However, it can be a significant cost that you may want to eliminate once you've built up enough equity. If you're looking to cancel mortgage insurance in Washington, here's a comprehensive guide on how to do it.
Mortgage insurance protects lenders in case a borrower defaults on their loan. It can come in two forms: private mortgage insurance (PMI) for conventional loans and mortgage insurance premiums (MIP) for FHA loans. In Washington, cancelling PMI is a more common concern for homeowners with conventional loans.
To cancel PMI, you typically need to have at least 20% equity in your home. This means that your mortgage balance should not exceed 80% of your home's appraised value. You can calculate your equity by subtracting your current mortgage balance from your home's market value.
Your mortgage statement provides important information about your current situation, including your loan balance, interest rate, and any PMI payments. Identifying the amount of PMI you are currently paying will help you determine if it's time to proceed with cancellation.
Some loans may require PMI for a set period of time regardless of equity. Check your loan documents to see if there are specific conditions that dictate when you can cancel PMI.
If your home has appreciated significantly, you may need to get a professional appraisal to establish its current market value. Contact your lender to inquire if they require a new appraisal to verify your equity before canceling PMI.
Once you confirm that you have sufficient equity and know the necessary steps through your loan documents, reach out to your lender. They will provide guidance on how to formally request the cancellation of PMI. This may involve submitting a written request along with your appraisal results if needed.
After your request has been submitted, follow up with your lender to ensure that the cancellation process is being handled. Keep records of all correspondence and documentation in case any issues arise.
While cancelling mortgage insurance can save you money, it's essential to remember that it may not be suitable for everyone. Before moving forward, consider factors such as the current housing market, future home value projections, and whether you plan to move soon. If you're uncertain, consulting a financial advisor can provide additional insight.
Canceling mortgage insurance in Washington can result in significant savings on your monthly mortgage payment. By following these steps—determining your equity, reviewing your loan terms, getting an appraisal if needed, and contacting your lender—you can successfully eliminate this extra cost and enjoy more equity in your home.
