Three ways to get rid of mortgage insurance include waiting until the lender must legally drop the insurance; paying down the loan and asking the lender to drop the insurance; and refinancing, says Bankrate. Refinancing and waiting for automatic termination are more reliable methods than early loan payment.
When a loan's amortization schedule reaches 78 percent of the home's original value, the lender must terminate the mortgage insurance, explains Bankrate. The homeowner must be current on the loan for the automatic removal of the insurance, and the home must be the primary residence of the homeowner. Making early payments on the loan does not force the lender to drop the insurance earlier. The law only forces the termination on the date the amortization schedule has the loan falling below the 78 percent threshold.
Borrowers can make early payments and request mortgage insurance payments be terminated based on the home's loan-to-value ratio, says Bankrate. The lender may terminate the insurance at the homeowner's request when the loan reaches 80 percent of the home's value. The lender may also deny the request and force the homeowner to wait for the legal termination date.
Refinancing ends mortgage insurance payments if the refinance occurs with a new loan-to-value ratio of 80 percent or less, explains Bankrate. Providing a down payment equal to 20 percent of the home's value on a new loan automatically exempts borrowers from mortgage insurance.