Still Paying PMI? Your Home’s Equity May Hold the Exit Key

 

Still Paying PMI? Your Home’s Equity May Hold the Exit Key

Could it be time for you to review your mortgage to determine the ability to cancel your mortgage insurance premium?  Let’s unwrap the topic and learn more about the executive order signed this week and how it may affect you.

If your downpayment at purchase was less than 20% you are likely paying a mortgage insurance premium.   This premium insures the lender’s investment in your loan in the event of default.  If your equity position changes that calculation you may be able to cancel the policy and save significantly every month. Mortgage insurance premiums typically range from 0.5% - 3% of the loan amount annually.  That actual rate is determined by many risk factors considered by the lender.

Next steps?  The first thing you’ll need to do is call your mortgage company to determine how much you are paying and what documents will be required to cancel. In most cases a new appraisal will be required to support a value of 80% loan to 20% equity.  In other cases, a market analysis may be sufficient.  The next questions will be requirements for the individual or firm determining that market value. If you’ve owned your home long enough a tax assessment may be all that is required.  Actually, pretty simple.

A new executive order has been signed which will automatically cancel the premium when equity reaches the 20% level.  The details haven’t been disclosed yet but rest assured, it won’t be retroactive so in the short-term evaluating your mortgage, mortgage insurance and any other insurance policies should be done annually.  Is it time to call your realtor for help?

Financial Friday

 

Take a Deep Breath—The Fed’s Rate
Increase May Not Mean What You Think

by John Stickle

Take a deep breath and relax. The Fed's latest quarter-point interest-rate hike may have very little direct effect on a 30-year mortgage.

The Fed primarily controls short-term interest rates. While mortgage rates can react to its decisions, the 30-year mortgage rate is driven more by inflation, Treasury bond yields and what investors believe is coming next. A quarter-point Fed increase does not automatically mean mortgage rates will increase by a quarter point.

Even if a $400,000, 30-year mortgage moved from 6.95% to 7.20%, the principal-and-interest payment would increase by approximately $67 per month. Nobody likes paying more, but it may not be the budget-buster the headlines make it sound like.

Interest rates matter, but they are not the only factor driving the real estate market. Here in St. Augustine and St. Johns County, it still comes down to the basics: price, inventory, condition and competition.

A well-priced home in good condition can still sell, while an overpriced home can sit regardless of what the Fed does.

The bottom line: one quarter-point increase should not cause buyers or sellers to panic. Look past the headlines and pay attention to the numbers that actually affect your property and your monthly payment.