Mortgage insurance is often a necessary expense for homeowners who put down less than 20% on their home purchase. However, many people in Nevada seek ways to remove this additional cost from their monthly mortgage payment. Here’s a comprehensive guide on how to remove mortgage insurance from your loan in Nevada.
1. Understand Your Mortgage Insurance Type
First, it’s essential to recognize the type of mortgage insurance associated with your loan. There are generally two types: Private Mortgage Insurance (PMI) for conventional loans and Mortgage Insurance Premium (MIP) for FHA loans. Understanding which category your loan falls into is crucial for determining the removal process.
2. Check Your Loan Status
Review your loan documents to check how much equity you have in your home. Typically, PMI can be eliminated once you reach 20% equity based on the home’s original purchase price or the appraised value at the time of refinancing. It’s advisable to keep an eye on your home’s appreciation, as it can affect equity.
3. Request a PMI Cancellation
If your mortgage is conventional and you believe you've reached 20% equity, you can request a PMI cancellation from your lender. Ensure you have documentation, like your home’s recent appraisal or proof of improvements that may have increased its value. This request should be formally written and submitted to your loan servicer.
4. Consider a Home Appraisal
In some cases, obtaining a home appraisal can be a worthwhile investment. If the appraisal reflects an increase in your home’s value and confirms that you have indeed reached the 20% equity threshold, it can serve as solid evidence for your lender to approve the cancellation of PMI.
5. Review FHA Loan Guidelines
For those with FHA loans, removing MIP is a bit different. Generally, if your FHA loan was taken out after June 2013, you will be required to pay MIP for the life of the loan if your down payment was less than 10%. If your down payment was more than 10%, MIP can be removed after 11 years. If you're eligible, you will need to refinance your FHA loan into a conventional loan to eliminate the MIP entirely.
6. Refinance Your Mortgage
Refinancing is another effective strategy to remove mortgage insurance. If interest rates are favorable, refinancing to a conventional loan can help eliminate PMI altogether, especially if you have sufficient equity. This option not only helps in removing mortgage insurance but may also lower your overall interest rate, leading to significant savings.
7. Know Your Rights
Familiarize yourself with the Homeowners Protection Act, which protects homeowners against excessive PMI charges. Under this act, lenders are required to automatically terminate PMI when your mortgage balance reaches 78% of the original value of your home, given that you are not delinquent on your payments.
8. Keep Records and Stay Proactive
Maintain thorough records of your mortgage payments and any correspondence with your lender regarding your mortgage insurance. If you encounter any issues or delays in the cancellation process, having this documentation can be helpful.
In summary, removing mortgage insurance from your loan in Nevada involves understanding your mortgage type, checking your equity status, submitting proper requests, and potentially refinancing if needed. By following these steps, you can effectively eliminate unnecessary expenses and increase your savings over time.
