How to get out of mortgage insurance after the mortgage started

Question

Hi,If I didn't have enough down payment to cover 20% of my mortgage, I obviously had to add mortgage insurance to my total loan. When I'm able to accumulate more savings, other than refinancing my mortgage and costing $4000 to $5000 closing fees, is there another way to get rid of the mortgage insurance portion on my loan? I'm in Canada in case that makes a difference with the regulations or laws.Thank you,Yves

Joe Splitrock · Answer

Check with your mortgage provider on terms. Some loans have permanent mortgage insurance, so refinance is the only option. Usually you can get out of mortgage insurance after the equity requirement is met, so if you pay down to 80% of value owed. You can also sometimes use appraisal to show new value, but sometimes the appraisal equity requirement is higher than the original LTV requirement. In other words, you may have needed 80% LTV to avoid mortgage insurance, but with appraisal you may need 60% LTV (40% equity). Just call your loan servicer and ask them what the options are to get rid of it. Lots of people may respond here, but without knowing the terms of your loan, we are all just guessing.

Trevor Davis · Answer

There is something called "recasting" a mortgage. You can put down a chunk of money and they recalculate your monthly payment accordingly. I plan on doing this when I get within striking distance of meeting the 20% threshold. I'm not sure how ubiquitous this option is, so you'd have to see if this option is available to you.

Chad U. · Answer

In Canada , if you do not have 20% down there is a one-time payment for mortgage insurance which is either a lump sum upfront or it is tacked onto the balance of your mortgage. As was noted above. There are no monthly payments towards it like it is in the US. If you go and buy another property and still do not have 20% down, yes you will need to pay for the insurance again.

Yves Bourdeau · Answer

I'm sure You're right Wayne, but Julie above is a Canadian lender. Maybe I'm just missing some information or not asking the correct question. I thought it was a straight forward question, with a no there isn't a way or yes you have options to not have to pay insurance until loan is paid off.

Wayne Brooks · Answer

@Yves Bourdeau Most of here only know the US reg.s.

Yves Bourdeau · Answer

@Julie Tohactually I'm the one who originally started this thread. I'm just trying to understand how mortgage insurance works. let me pose my question again. If I borrow an amount and my down payment is less than 20% I will have to pay insurance which is added to my monthly payment. So what I was asking is, other than refinancing the loan which could cost thousands, is there another way to take the insurance portion of the loan, for example, if I have 20% or more that I can pay down on my loan. I'm just wondering if I'm stuck paying the insurance until the end of my mortgage or refinance. Thanks

Wayne Brooks · Answer

@Julie Toh Maybe the reason for the confusion in the poster’s mind....in the US, you can eliminate PMI automatically on a conventional after the equity exceeds 20%, when other conditions are met, without having to refinance.

Julie Toh · Answer

@Yves Bourdeau When the down payment is less than 20%, you are qualifying for is an insured mortgage. An insured mortgage carries default insurance as you're aware. There are two ways to pay for the default insurance: either pay in full or add the default insurance to the mortgage loan. I have arranged over 300 mortgages and the majority of clients choose the latter. I'm not sure what you mean by, "to get ride of the mortgage insurance portion..."

Yves Bourdeau · Answer

Hi Julie, I'm in Canada, moving from Victoria BC to Cornwall ON area. You're completely correct about getting educated. I'm reading tons of books and watching videos and joining forums and meeting people like you 🙂. I haven't bought anything yet but I found out that I can borrow enough to buy my first income property. Ideally I'd like to buy it before I move there. Hence the question in this post. I know I'll need mortgage insurance so I wanted to know options on removing this insurance after a while.

Julie Toh · Answer

@Yves Bourdeau Where are you located? Canada or USA? If you're located in Canada, you need education on the guidelines for the Canadian mortgage default insurance. I am a licensed mortgage professional located in Canada and am knowledgeable about the guidelines.