When Can You Cancel Your Mortgage Insurance?
As a rental property investor, you know that your lender requires mortgage insurance in certain cases. Here’s a quick rundown of mortgage insurance requirements:
- Federal Housing Administration (FHA) loan programs require mutual mortgage insurance (MMI) for loans with a less than 20% down payment or a greater than 80% loan to value (LTV) ratio.
- Conventional loans that have a less than 20% down payment or greater than 80% LTV require private mortgage insurance (PMI).
When can you cancel MMI/PMI?
Once your property value reaches 20 to 28% of what you have in equity, you may be able to remove the MMI, which can be a payment of anywhere between $75 to $150 a month, or more. However, FHA rules are restrictive about whether and when a borrower can request cancellation of the annual mortgage insurance premium.
Borrowers with conventional loans have more leeway when it comes to removing the PMI from their mortgage loan and monthly payment. After the mortgage’s principal balance reaches 80%, you can request that your lender cancel the PMI. Requests must be made in writing, and you must have a good payment history and meet other criteria to be to be approved.
Invest your savings
So what are you going to do with that extra money? Here’s an idea — use it to hire a property management company. Here’s what you can receive by canceling your MMI/PMI and partnering with Management One. You’ll get a company that will:
- Review and process rental applications.
- Vet prospective residents.
- Have an inclusive, clearly written, lawyer-reviewed lease.
- Do maintenance and repair, even in emergencies.
- Be able to list, show, and rent the property quickly to minimize vacancies, which cut into your profits.
- Understand landlord-tenant laws.
Don’t let your dollars go to a fund you don’t need. Simply repurpose them and reap the benefits of having a full service property management company handle all your property management needs at zero cost.