Mortgage Company’s won’t remove MIP or mortgage insurance premium this is something most of you had to hear when u applied for removal of MIP from your FHA loans. And if by any chance your loan closed on Jan 1, 2001. Then, there are only two ways to remove mortgage insurance that either you pay off the whole loan or refinance your loan. Generally FHA loans don’t have a PMI or private mortgage insurance but rather they have MIP and at the same time is less expensive monthly. The borrower can pay for MIP either at closing or monthly along with other mortgage payments.
As per the FHA regulations, borrowers whose loan closed after Jan. 1, 2001, if the upfront premium is already paid, then the MIP will come off once the loan to value reaches 78% depending on the initial purchased price/value of the home and the principal payments that were made against the loan. And if the borrower didn’t pay any upfront MIP, then you cannot get a removal from the MIP of your loan. In this situation refinancing is an option that can be considered, but that is also applicable if your home’s value has gone up enough that you are allowed to take up conventional financing without any PMI.
If any of below mentioned conditions applies for you then u can get a MIP removal from your FHA loan:
1. Your MIP can be cancelled if you have if your mortgage terms more than 15 years and the loan to value ratio goes to 78%, with condition that you have paid annual mortgage insurance premium for a minimum of 5 years.
2. If your mortgage with period of 15 years or less and having a loan to value ratio of 90% or more your MIP can be cancelled if the loan to value ratio goes to 78%, the time for which mortgagor has given the annual mortgage premiums doesn’t matter here.
3. If your mortgage with period of 15 years or less and having a loan to value ratio of 89.99% or less you wont be charged any annual MIP.
Though, your mortgage will be canceled as mention above, but the insurance contract will remain in effect for its complete term.
It’s the decision of FHA which will decide when the borrower has reached the given mark of loan to value ration on the basis of lower on the sale price or appraised value at the time of origination. Appraised value which is new will not be considered in any case.