Removing Mortgage Insurance from Your Monthly Mortgage Payment

Now is a great time to look at removing that private mortgage insuranc you have been paying on your home.  Home values in CO had the largest increase from February 2014 to February 2015 by 9.8 percent, according to CoreLogic HomePrice Index.  This is great news for homeowners who purchased their home in the last 5 years and have had to include mortgage insurance in the monthly payment.  Private mortgage insurance is expensive and can be removed easily, saving several hundred dollars every month.

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There are a few ways to remove private mortgage insurance from your monthly payment, once you feel yyour loan to value has reached 78-80% or less.  If you are paying it down to less than 80% through additional payments towards principal reduction, the lender may require you get an appraisal to prove the value of the home.  If you have reached the end of the required period for the mortgage insurance, the lender is required to drop the required monthly amount, once the balance has hit 78%, regardless of the value of the home.  They are also required to drop mortgage insurance if the loan has reached the mid-term of the life of the loan.

With the large increase in home values in Colorado in the last two years, it is possible to remove the required mortgage insurance, after a shorter period of time, through refinancing.  I have found that many of the FHA purchases that we originated in the last 2 years, have increased enough in value to be able remove the mortgage insurance immediately, without having to wait out the life of the loan for a FHA mortgage or until the principal balance hits 80% on a conventional loan.  FHA changed the requirement for mortgage insurance on June 3, 2013.  On new FHA purchases, mortgage insurance is now required for the life of the loan.  FHA mortgages are great for helping first time homebuyers get into a home.  However, once the value has increased, significantly, and the homeowner has established a good payment history, it makes sense to refinance into a conventional mortgage without mortgage insurance to reduce the overall monthly mortgage payments.

Before removing mortgage insurance, a few factors need to be evaluated.

  1. Good payment history and current on all payments.
  2. Current value of the home.  You can compare values on several websites, just to get an idea of value.  However, I do not put a lot of weight on these sites as they can be off by several thousand dollars.  Remember, an appraisal is based upon, current sales, upgrades to the home compared to others that have sold in the area, location, area trends and finally, an appraisers opinion.  I suggest contacting a local Realtor for an opinion of value or myself.  I can walk you through estimating the value based upon recent sales in the area.  If you choose to acquire a full appraisal, it can cost between $350 and $650, depending on the appraiser and the company.
  3. You will need to prove there are no other liens against the property.  This is, generally, done through a trusted title company.  Most title agencies will pull a basic report for approximately $150.

All this may seem like a lot of work just to reduce your payment by a few hundred dollars.  Deciding whether it is worth it or not can be very confusing.  I can walk you through a logical process to help you decide whether the payoff is worth the effort.  If you or someone you know could use the extra couple hundred dollars a month to lighten the load, please give me call me at 303-549-0891.  I am here to help most days, evenings and weekends, when most other lenders are closed.

Contact Tiffany here for more information.

NMLS# 197552 Powered by Mac5 Mortgage Inc. 199325

NMLS# 197552
Powered by Mac5 Mortgage Inc. 199325