Ali Elahi, one of my firm’s clients, doubled the rate and won big, saving $ 800 on monthly mortgage payments, cutting his mortgage rate in half and ditching mortgage insurance.
Elahi paid $ 375,000 for his apartment in Laguna Hills in 2018. As rates fell and his capital grew, he was able to cut his monthly payment by $ 400 through refinancing in 2019. But he didn’t have enough capital to cancel his mortgage insurance. …
Rinse and repeat.
In June 2021, Elahi achieved this. Armed with a $ 440,000 valuation of the property, he canceled the $ 139 monthly mortgage insurance bill. And he cut the interest rate by 1.25% to 3.125%. Another $ 400 overhead is gone.
“Exciting,” Elahi said. “This is a double sigh of relief.”
What is private mortgage insurance and why do some borrowers have to pay it?
PMI is required for loans sold to mortgage giants Fannie Mae and Freddie Mac, which do not have at least 20% down payment or 20% capital in case of refinancing transactions.
Either way, you have to pay for a policy that protects F&F in the event of a home loan default.
Most borrowers pay a monthly premium for this, added to your property tax and fire insurance escrow account.
You can also pay this in a lump sum. Or your mortgage lender can pay – this is called a premium paid by the lender. Everything it means is built into the course. There is never a free lunch.
Mortgage insurance is risk-based, meaning the higher your average FICO credit rating, the lower the insurance premium.
For example, assuming a 10% down payment on a mortgage of $ 400,000 and a score of 740, your monthly payment would be approximately $ 97. For that same loan with a rating of 620 (the lowest acceptable rate for mortgage insurance), your monthly installment would be an astronomical $ 407.
The Homeowner Protection Act of 1998 requires mortgage companies to remove the PMI on the day the mortgage balance is expected to reach 80% of the original value.
A good payment history and no re-collateral are the prerequisites for the exemption. Or you can opt out of payment with at least two years of timely payments and 25% equity.
In this scorching market, you have a quicker way to ditch your mortgage insurance. Either kill two birds with one stone by lowering your rate and eliminating PMI, or ask your mortgage servants to remove the premium.
Your service center may or may not be able to process your request.
If the maintenance staff are keen on removing your PMI, they will likely require you to pay about $ 600 for an estimate that backs up your claim of 20% or more capital. If your support staff is telling you awesome, mention that you are considering moving elsewhere to refinance. Your service center does not want to lose income from servicing your loan.
Refinancing may be the best option as mortgage rates have dropped over the past few years.
Another client at my firm was fortunate enough to give up their PMI entirely.
Sarah Coverage paid $ 483,500 for the Laguna Niguel condo in January this year, down just 5%. Her home was valued at a whopping $ 56,500 in eight short months.
Now she has 15% of the capital. While that’s not enough to eliminate her PMI, she could almost halve her $ 84 premium through refinancing. It locked in the 2.75% rate in the same week that Freddie Mac announced its record lows. Her rate is better than she can get with free refinancing.
“It looks disappointing, but at the same time I was lucky,” said Coverage. “You can’t plan anything better.”
Interesting facts for you.
According to Mike Zimmerman, senior vice president of MGIC, one of the largest mortgage insurance providers in America, at the national level, about $ 1 trillion in conventional mortgages, or more than 10% of the US mortgage market, is covered by PMI. The current PMI business start-up crop is around 85% buying and 15% refinancing.
According to Inside Mortgage Finance, about 13% of California mortgages purchased by Fan and Fred between January 2020 and June of this year, or more than $ 106 billion, were mortgage-insured.
Meanwhile, home prices in Southern California have surged 26% since the beginning of 2018, according to Attom Data Solutions.
Borrowers with FHA mortgages have the same option to opt out of mortgage insurance. If you have an FHA loan, eliminate the monthly premium by refinancing into a regular mortgage.
Freddie Mac appreciated the news: The 30-year fixed rate averaged 2.87%, unchanged from last week. The 15-year fixed rate averaged 2.18%, up 1 basis point from last week.
The Mortgage Bankers Association reported a 2.4% drop in mortgage applications last week.
Bottom line: Assuming that the borrower receives an average 30-year fixed rate on the corresponding loan of $ 548,250, the payment last year was $ 18 more than this week’s $ 2,273.
What do I see: Locally, highly qualified borrowers can obtain the following fixed rate mortgages for 1 point: 30-year FHA at 2.25%, 15-year standard at 1.875%, 30-year standard at 2.5%, 15-year regular a high balance ($ 548,251 to $ 822,375) at 1.99%, a 30-year regular high balance at 2.69%, and a 30-year fixed large balance of 2.875%.
Eye-catching Credit of the Week: 15 year flat rate 2.375% no cost.
Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or email@example.com. His site www.mortgagegrader.com…