How Long Do I Have to Pay Mortgage Insurance in Washington?

Some home buyers in Washington may need mortgage insurance, either through the FHA or from private insurance companies, depending on the loan type and down payment.

How long you have to pay it depends mostly on the loan type. With a conventional loan, PMI can usually end once you reach the required equity threshold. With an FHA loan, mortgage insurance usually lasts longer and, depending on the loan terms, may continue for 11 years or for the life of the loan unless you pay off or refinance the mortgage.

The answer partly depends on the type of home loan you have or will have.

In this article, we’ll answer a common question you may be asking yourself: “How long do I have to pay mortgage insurance in Washington?”

What Is Mortgage Insurance?

Mortgage insurance is a type of insurance policy that protects the lender in case the borrower defaults on (stops paying) their loan payments. In the state of Washington, mortgage insurance is usually required when a borrower makes a low down payment.

Mortgage insurance in WA reduces the level of risk for lenders, allowing them to offer loans with smaller down payments. But home buyers can benefit from it as well.

Without mortgage insurance, borrowers would have to make bigger down payments, which can require years to save up for. So it basically shortens the path to homeownership by reducing the required investment.

There are two main types of mortgage insurance: FHA and PMI.

1. FHA Mortgage Insurance

In Washington, home buyers who use an FHA loan to buy a house have to pay mortgage insurance provided through the Federal Housing Administration. This is mandatory for all FHA purchase loans.

FHA requires an upfront premium for most insured loans, and it also charges annual mortgage insurance. Borrower costs can vary based on loan factors, and these charges can sometimes be rolled into the loan.

2. Private Mortgage Insurance (PMI)

Conventional home loans (that are not insured by the government) can also require mortgage insurance, but only in certain cases. And it works differently from the FHA insurance coverage mentioned above.

In short, if a conventional loan accounts for more than 80% of the home’s current value, private mortgage insurance (PMI) will probably be required. It’s referred to as “private” insurance because it comes from an insurer in the private sector, rather than the government.

In the state of Washington, the cost of PMI can vary based on the borrower, loan, and down payment. So it could increase a homeowner’s monthly mortgage payments.

How Long Do You Have to Pay It?

The rules for cancelling mortgage insurance can vary depending on whether you have FHA mortgage insurance, or PMI with a conventional loan.

With private mortgage insurance, homeowners can usually request to have their PMI policy canceled when the loan balance drops to 80% of the original home value.

Over time, as you make regular monthly payments, your loan-to-value (LTV) ratio declines. When the LTV drops down to 80% or below, you will no longer need to pay for private mortgage insurance.

Here’s another way to think of it: Homeowners in Washington can typically cancel their PMI policies when they reach the 20% equity level. And you could avoid it entirely by putting down 20% or more when buying a home.

The rules for FHA loans are more specific. For active risk-based FHA cases with a closing date after December 31, 2000 and a case number assignment, the annual mortgage insurance premium is assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.

That means some FHA borrowers will pay annual mortgage insurance for 11 years, while others will keep paying it for the life of the loan. If your FHA mortgage insurance is set to last for the full term, it does not cancel the way borrower-paid PMI can on a conventional loan. In that situation, the practical way to stop paying it is usually to pay off the loan or refinance into a different mortgage.

So, the length of time you have to pay WA mortgage insurance can vary based on the loan type and the rate at which you build equity.

PMI cancellation vs. automatic termination: what to check

If you have a conventional loan, do not assume PMI stops the moment you reach 20% equity. Borrower-requested cancellation and automatic termination are not the same. The 80% threshold used for cancellation is based on the property’s original value, and automatic termination follows its own timing rules. Before assuming your PMI will end, review your closing documents and servicing statements to confirm whether your loan uses borrower-requested cancellation, automatic termination, or both.

There’s a Major Upside as Well

Some homeowners in Washington end up paying mortgage insurance premiums for years. At first glance, that might seem like a long-term financial burden without any direct value for the homeowner.

But there are two big benefits to keep in mind:

1. Buying sooner rather than later. It can take years for a typical home buyer in Washington to save up for a standard 20% down payment. Mortgage insurance gives you a shortcut by allowing you to make a down payment in the 3% to 3.5% range.
2. Expanded housing options. Mortgage insurance also helps home buyers purchase properties that would otherwise be out of their reach. This can benefit all home buyers in Washington, but especially those in pricier real estate markets like the Seattle area.

Which option should you evaluate next?

If mortgage insurance duration is a major concern, the next step is to compare your options based on your situation rather than focusing on one rule alone. If you expect to stay in the home for a long time and have stronger credit, a conventional loan with PMI may be worth comparing because the insurance can potentially be removed later. If your available cash is limited or FHA qualification is a better fit, FHA financing might still make sense even if the insurance lasts longer. If you can make a larger down payment, you may be able to reduce or avoid mortgage insurance from the start. And if you need a low-down-payment option now, it can help to think ahead about whether refinancing later could be realistic once your equity, credit profile, or payment goals improve. The downside to mortgage insurance in Washington is that it could add to your monthly mortgage payments. The upside is that it opens the door to homeownership for a lot of people who otherwise would not be able to purchase a home in Washington.

Mortgage Insurance In Washington: Do You Need It?

To answer your question, “How long do I have to pay mortgage insurance in Washington?” the answer ultimately depends on the type of mortgage you have (FHA or conventional), and how quickly you can reach the 20% mark in home equity.

Have Questions About Mortgages?

Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.