For homeowners in Washington, understanding how to get rid of mortgage insurance can lead to significant savings. Mortgage insurance is often required for borrowers who make a down payment of less than 20% on their home. While it provides protection for lenders, it can be an additional financial burden for homeowners. Here’s how you can eliminate or reduce this cost.
1. Reach 20% Equity in Your Home
One of the most straightforward ways to remove mortgage insurance is by increasing your home equity to at least 20%. This can be achieved through a combination of paying down your mortgage principal and increasing your property value. If your home has appreciated in value, you may already have enough equity to request the removal of mortgage insurance.
2. Request a Home Appraisal
If you're confident that your home’s value has increased, consider hiring a professional appraiser to assess its current market value. Once you have the appraisal, you can provide this documentation to your lender and request the removal of the mortgage insurance premium (MIP).
3. Refinance Your Mortgage
Another effective strategy to eliminate mortgage insurance is refinancing your mortgage. If you can refinance into a new loan with a lower rate or a smaller amount of mortgage insurance, you might not only get rid of the MI premium but even lower your monthly payments. Make sure to calculate the costs of refinancing to ensure it's beneficial in the long run.
4. Keep an Eye on Your Mortgage Terms
Many lenders will automatically drop the mortgage insurance once you reach 78% of the original loan-to-value ratio based on your home’s purchase price. It's wise to review your mortgage agreement closely to understand the specifics surrounding the removal of mortgage insurance.
5. Explore Special Programs
In Washington, some state programs may provide alternatives to traditional mortgage insurance. For instance, programs through the Washington State Housing Finance Commission may offer reduced fees or eliminate the need for MI altogether. Explore these options with your lender to see if you qualify.
6. Maintain a Good Payment History
A strong payment history on your mortgage can enhance your chances of removing mortgage insurance. Lenders often look favorably on borrowers who consistently make on-time payments, potentially making them more willing to consider your request for cancellation.
7. Communicate with Your Lender
Lastly, proactive communication with your lender is essential. Many homeowners are unaware of their rights regarding mortgage insurance. Reach out to your lender to discuss your options and the steps you need to take to initiate the process of getting rid of mortgage insurance.
In summary, eliminating mortgage insurance in Washington can be achieved through various strategies, including increasing your equity, refinancing, and utilizing state programs. By understanding your options and working closely with your lender, you can save money and improve your financial situation.
