If you bought your home with less than 20% down, chances are you’re paying mortgage insurance every month. It’s an extra cost that protects the lender, not you, and it can add up to thousands of dollars a year.
Here’s the good news: with Florida home values rising steadily over the past few years, you may already have enough equity to cancel your mortgage insurance. That could free up extra money in your budget for savings, home improvements, or just more breathing room.
Let’s walk through how mortgage insurance works, when you can cancel it, and what other options you might have.
What Is Mortgage Insurance and Why Do You Pay It?
Mortgage insurance, often called PMI (private mortgage insurance), is usually required if you put less than 20% down on your home. It doesn’t benefit you directly, it protects the lender in case you stop making payments.
The cost varies but can be hundreds of dollars each month. Over the course of a year, that’s thousands of dollars you could be saving once your mortgage insurance is removed.
Here’s where rising Florida home values work in your favor. If you bought a home in, say, 2020 with a small down payment, your property may now be worth a lot more. That extra equity could make you eligible to drop PMI sooner than you expected.
When Can You Cancel Mortgage Insurance?
There are two main paths to canceling PMI: based on your loan balance or on your home’s current value.
Cancellation Based on Your Loan Balance
The Homeowners Protection Act (HPA) gives you the right to request cancellation when your mortgage balance reaches 80% of your home’s original value (the lesser of the purchase price or appraised value when you bought).
- You can request cancellation once you hit 80% loan-to-value.
- Your lender must automatically cancel PMI when you reach 78%, as long as your payments are current.
- You’ll need a good payment history with no serious late payments.
Want to know if your equity qualifies? Download your free home analysis report today.
Cancellation Based on Current Market Value
With Florida property values increasing, you may qualify even faster by requesting cancellation based on today’s appraised value.
Here’s how it usually works:
- If your loan is at least 2 years old but less than 5, you’ll need about 25% equity.
- If your loan is 5 years or older, 20% equity may be enough.
- Your lender will likely require a new appraisal, which comes with a cost.
Even with the appraisal expense, the savings from canceling PMI often outweigh it within a few months.
Refinancing as Another Option
Sometimes refinancing your mortgage is the smarter move. By refinancing, you can:
- Eliminate PMI
- Potentially lower your monthly payment
- Change your loan term to better fit your financial goals
This is especially true for FHA loans, which have mortgage insurance that typically lasts for the life of the loan. The only way to remove FHA mortgage insurance is to refinance into a conventional loan once you have enough equity.
Refinancing can also give you access to your home’s equity for renovations, debt consolidation, or other financial goals, all while getting rid of PMI.
Things to Keep in Mind
Before you move forward, here are a few details to consider:
- Appraisal Costs: Expect to pay for a new appraisal if you’re canceling based on current value.
- Lender Requirements: Each lender may have specific conditions. Always confirm before making a request.
- Market Conditions: If home values dip, your equity could be affected, so timing matters.
Frequently Asked Questions
Will getting an appraisal cause my property taxes to increase?
No. The appraisal your lender requires for PMI removal is separate from the county tax assessor’s process. It’s only used to confirm your home’s current value for the loan, not for property tax purposes. Local governments reassess property values on their own schedule, often based on recent sales in your area, but your PMI appraisal doesn’t directly impact your tax bill.
How long does it take to remove PMI once I request it?
Timelines vary depending on the lender and whether an appraisal is needed. If your loan is scheduled for automatic cancellation at 78% loan-to-value and your payments are current, it should happen as soon as you hit that mark. If you’re requesting removal early based on equity or a new appraisal, expect the process to take a few weeks to a couple of months. The fastest way to avoid delays is to make sure your payments are up to date and have any required paperwork ready.
Can I remove PMI early based on home appreciation?
Yes, in many cases you can. If your home has gone up in value since you bought it, you may be able to remove PMI sooner than waiting for your balance to reach the 80% mark under your original loan schedule.
Here’s how it usually works:
- If your loan is at least 2 years old (but less than 5), you typically need about 25% equity based on a new appraisal.
- If your loan is 5 years or older, you usually need at least 20% equity.
- Your lender will likely require you to pay for an appraisal to verify the current value.
This can be a smart move in areas like Florida, where property values have climbed quickly in recent years. Even though you’ll need to cover the appraisal cost, the monthly savings from dropping PMI often make it worth it within just a few months.
Note: Every lender has their own rules, so always check with them to confirm what’s required for your specific loan. Ideal Lending is here to help explain your options, but we are not a financial advisor.
Canceling mortgage insurance could save you hundreds of dollars each month. That’s money that stays in your pocket instead of going to an insurance premium.
Find out today if you qualify! Download your free home analysis report or connect with one of Ideal Lending’s Florida loan experts.