Removing mortgage insurance is not the same as refinancing

Owners frequently refinance to get out of mortgage insurance when the insurance was going to come off anyway. On a conventional loan, private mortgage insurance can generally be cancelled at the borrower's request once the loan balance reaches a defined percentage of the original value, provided the payment history is good and the servicer's conditions are met. It also terminates automatically at a further point in the amortisation schedule, without a request. Appreciation can accelerate the request route, usually with a new valuation the servicer orders. The point is that none of that requires a new loan, new closing costs or a new rate. Government-backed loans behave differently. On many FHA loans originated in recent years the mortgage insurance premium runs for the life of the loan regardless of equity, and a refinance into a conventional loan is the only exit. That is a real reason to refinance, and it is a different reason from the one above. The sequence worth following: call the servicer and ask what the cancellation conditions are and what the current balance is against them. Get it in writing. Then, and only then, compare that path against a refinance quote including all costs. An owner who refinances in month thirty to remove insurance that would have terminated in month thirty-six has paid several thousand dollars to save six payments of a few hundred. This article is general information, not legal, tax or financial advice. Rules change and every deal is different — check your own case with a licensed professional. Alberto Zaltzberg — Adonait · adonait.com