For anyone who has ever taken out a mortgage, the repayments always seems like an albatross, a heavy yoke or a milestone tied around the neck, which simply refuses to become loosened despite all efforts. In such situations, the numerous benefits of mortgage are comfortably forgotten. Even to compound an already bad situation some lenders of mortgage require the borrower to take out mortgage insurance as a cover for their funds if per chance foreclosure or any other undesired event occurs.
However, mortgage insurance which adds to the cost of the home can be removed, thereby saving the borrowers substantial amounts in dollar. Before, homeowners were required to pay up to 80% of the borrowed mortgage before their mortgage insurance can be removed, today it is a different. Here are 5 ways of removing mortgage insurance.
Always be on time in making payments. If payments are made regularly and on time, then with time the mortgage insurance will be removed when the 20% mark has been reached. However, if even a single payment is missed or late, then the possibility of the loan being classified as a high risk loan exists, if this happens, then it requires up to 50% repayment before the mortgage insurance can be removed.
It is important to recognize your rights with regards to the mortgage. Impress it on the lender that you want to be fully informed on your options, if you are aware an option that exists, then you are better place d to take decisions that will ensure the timely removal of mortgage insurance.
Endeavour to get the current value of your home from appraisals. Lenders are more likely to pay attention to the current market value of your home when considering removing mortgage insurance than is value at the time of purchase. However this option should be exercised with caution, as it may not always favor the borrowers.
Pay up to the 20% equity required without missing any payment, when you have reached this mark, you are legally entitled to request for mortgage insurance removal, and the lender will have no option than to grant your request.
Finally consider the refinance option. This option may help provide a cheaper source of funds, which ultimately will lead to removal of the mortgage insurance.
With the new Homeowner’s Protection Act of 1998, mortgage insurance can be cancelled automatically once 22% of the equity has been paid by the mortgagor. This simply means that no more negotiations, request or application to the lender. However at the instance of the mortgagor, the mortgage insurance can be cancelled once the equity has reached 20%. It is now left to the reader to know his options of removing mortgage insurance from his monthly payments.