A Newly Remodeled Home

What Is Mortgage Insurance?

19 April 2017

Mathéo Gerard

If you are getting financing to buy a house, the odds are that your mortgage company is going to require you to get mortgage insurance. 

Mortgage Insurance

Mortgage insurance is an insurance policy that you pay on so that the mortgage company will get their money back if you default on your loan. Generally, if you pay less than 20% down on your house, then the insurance company is going to require you to get mortgage insurance. The monthly premium you pay for your insurance varies. The variables include how much your mortgage is and what your credit rating looks like. You don't have to pay the premium separately, since it is folded into your monthly mortgage payment. However, it can cause you to take somewhat longer to pay off your mortgage. 

Canceling Mortgage Insurance

Just because you have mortgage insurance when you get the mortgage, that doesn't mean that you have to keep your mortgage insurance the whole time that you are paying on your mortgage; there are ways to cancel it. 

1. Refinancing: One way to get rid of your mortgage insurance is to refinance your loan. However, you need to be careful when you do this. You need to make sure that mortgage rates are low. You also want to make sure that your home's value has gone up. If you do refinance, you should also end up with lower payments—lower than just what getting rid of your mortgage insurance premium would give you. 
2. Equity: Once you have 20% equity in your house, you can go to your mortgage company and ask them to cancel the insurance. The mortgage company should automatically cancel it when you owe 78% of your mortgage. 
3. Reappraisal: If you pay to have your house reappraised, then you can take that information to your mortgage company. They can look at that appraisal and compare it to the original selling price. Your mortgage company can use that information to decide whether or not you have gotten more than 20% of your mortgage paid down. This one isn't guaranteed. The mortgage company may not accept the appraisal, so they could continue your mortgage insurance payments. 

If you are going to get a house, you are likely to need to have a mortgage. If you are going to get a mortgage, then your lender will probably require you to have to pay for mortgage insurance. To learn more, contact a mortgage company like GRT VA LOAN.

Share