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If you did not put down at least 20% on your home purchase, more than likely, you were required to purchase mortgage insurance. Mortgage insurance is sometimes called Private Mortgage Insurance (PMI) or in the case of Government FHA loans, Mortgage Insurance Premium (MIP). Mortgage insurance guarantees the lender against any losses should you default. Most times, a foreclosure event costs the lender at least 20% of the value of a home by the time the property is foreclosed and resold. Mortgage insurance covers the lender for losses incurred so depositors or investors don’t lose their principal.
Mortgage Insurance typically adds .2% to 2.0% of the original loan balance per year. If you put down 5%, you can typically expect to pay .88% per year in addition to your current interest rate. In Bucks County, the average $280,000 mortgage loan would pay FHA $205 per month in FHA MIP.
Your lender is happy to have their loans insured and sleeps well at night. You, on the other hand, may be paying for insurance you don’t need. Your lender or servicer will not track you down and tell you that you may be able to eliminate your mortgage insurance and save money. So, how do can you get it canceled?
There are a few considerations depending on your specific loan:
If you are paying Mortgage Insurance, you should call us right now. We can do a free evaluation and possibly lower your interest rate and eliminate your mortgage insurance. Give us a call at 215-493-1500 or drop by our office. There is no cost or obligation and any loan officer will be glad to help.