As a result of refinancing, your total finance charges may be higher over the life of the loan.

Mortgage Insurance

The good news is you qualified for your first mortgage. The bad news is you qualified for your first mortgage but there’s an added monthly expense you weren’t expecting. One of the major impediments when buying a home is meeting the down payment requirements. This is usually where borrowers first encounter the term: Private Mortgage Insurance (PMI). PMI should be thought of as any other insurance premium, such as auto or fire insurance, but this pertains directly to your mortgage. Nations Lending and other lenders will typically require PMI on home loans if our client’s down payment is less than 20% of the value of the home. A large number of homebuyers cannot afford a 20 percent down payment, but private mortgage insurance allows buyers to purchase a home with less down than what may be required.

 

Certain borrowers will also have the option to refinance out of mortgage insurance and conventional MI payments cancel after the home reaches 20 percent equity. Said another way, once your loan-to-value ratio dips below 80%, PMI may be canceled. This option is available to our clients in two ways: (1) your normal monthly payments have lowered the principle amount owed on the loan below 80%, or (2) your home appreciates in value, hence lowering the loan-to-value ratio, as verified by a current appraisal. Our Personal Mortgage Advisors see their fair share of both.

 

In order to cancel PMI your request must be in writing, you must have a good payment history and be current on your payments., your lender may require you to certify that there are no junior liens (such as a second mortgage) on the property, and Nations Lending may also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the value of the home when you first bought it.

 

For FHA mortgages dated before June 3rd, 2013, the FHA MIP will automatically cancel once the loan reaches 78 percent loan-to-value and annual MIP has been paid for at least 60 months, for a 30 year loan term. For a 15 year loan term the annual MIP will cancel once the loan reached 78 percent loan-to-value but there is no requirement for MIP to be paid for at least 60 months.

 

If the value of your home has decreased, you may not be able to cancel PMI.