If you are someone that has had a FHA Loan for a period of time, you might not have realized that you don’t have to always pay mortgage insurance premium. I remember when my husband and I first bought our house this was something we talked about. Then as time went on, we forgot about it.
I did some research and thought I would answer this question here this time. What I am about to share is food for thought. You will want to get rid of your premium mortgage insurance because it is not tax deductible, like mortgage interest. I’m always happy to receive that statement at the end of the year from our mortgage company in preparation for our taxes.
When you first purchase a home, you are looking for all the deductions you can get. True you get a lot that first year you purchase the home more than the following years, because you have points as well as mortgage interest and some other items. Let’s get back to premium mortgage insurance and when can you stop paying it.
I must share that this very question was addressed in a lot of different places. One of them being moving.com. What I liked was that the lender could not force you to keep the PMI once the loan-to-value has gone below 80%, however, the lender will not advise you when you are eligible to discontinue the coverage and stop making the mortgage insurance premium (MIP) payment. I have to say, if the lenders did contact the buyers even months or years down the road regarding discontinuing their mortgage insurance premium, what do you think the buyers would think of their loan company?
I know that I personally would be recommending that loan officer to everyone that I knew would be purchasing a house. However, it is left up to you to keep a track of what is happening with your loan. To find out where you are with your loan, take a look at your most recent mortgage statement, even if you are paying electronically. The files are usually up to date. Divide the remaining principal by the original purchase price of your home. If that number is below 80%, call the lender and find out their specific procedure for removing premium mortgage insurance.
Before you do anything, remember, remember, it is the responsibility of the buyer (you) to track the debt to value ratio and make the arrangements to stop premium mortgage insurance.
I continued researching to see if there was any more information I could share with you that would help you answer this question. When I was reading the fha.gov website it actually gave more information based on the different loan amounts. Here is what I mean, it stated it you have a mortgage that is 15 years or less and the loan to value ratio of 90% and greater, the mortgage insurance premium will be terminated when the loan to value reaches 78%, irrespective of the length of time the borrower has paid the mortgage insurance premium. I want to caution you if you have a 15 year or less term, to check with your lender as to their procedures. Because I am always hesitant when terminology like “will” gets thrown around. Sometimes they don’t follow through.
Look at your statement and see where you stand with mortgage insurance payment. You might find that you can stop at this time. Follow your lenders procedure for discontinuing.