The Federal Housing Administration typically requires borrowers to pay for mortgage insurance, which protects the lender should the borrower default on his home loan, in two ways: an upfront mortgage insurance payment equal to one percent of the loan amount and an ongoing annual mortgage insurance premium equal to between 0.85 and 0.90 percent of the current loan balance. Once your loan balance is under 78 percent of your home's value, you no longer need to pay for mortgage insurance.
Pay your mortgage on time each month. You need five years with no late payments in order to cancel mortgage insurance on a 15-year or longer loan term, regardless of the size of your remaining principal.
Keep a careful record of your loan payments if you stray from the original amortization table, such as making higher monthly payments or making additional payments so you pay down your loan faster. Request a copy of your amortization table from your lender if you do not have one.
Pay down your mortgage loan balance to less than 78 percent of either your home's sales price or its appraised value at the time you purchased it, whichever is less. If your loan originated in 2001 or later, the FHA should automatically cancel your mortgage insurance once you pay down your balance to this point.
Confirm that the FHA automatically canceled your mortgage insurance. You should receive a notice from the FHA or your lender. Careful record-keeping will help you identify exactly when you've paid down the necessary amount.
Contact your lender if it does not cancel your mortgage insurance automatically. If the FHA handles your mortgage insurance but not your loan, your lender must contact the FHA to cancel your loan; you cannot do it directly.
The FHA does not consider a home's appraised value after the point of sale, regardless of whether the home's value increased or decreased.
Direct questions regarding canceling your mortgage insurance to the FHA Resource Center at 1-800-CALL-FHA.