Can I Save Money on My Mortgage?

Published on Sep 15, 2016 | by

Are you looking to save money? Are you paying PMI (Private Mortgage Insurance)?  Were you aware that conditions are right for taking a closer look at your mortgage statement?  Check it out!  If you are paying PMI, I encourage you to continue reading in hopes of saving some money each month.


 If you answered "YES" to any of the questions above, it may be time to consider taking advantage of the current financial market conditions as they apply to the residential real estate market. Face it, the prudent investor keeps an eye on the market. If there becomes an opportunity to reposition oneself to improve your holdings, that opportunity should then be considered. 


 Here are the conditions that make it worthy to consider the opportunity: 1) According to the data provided by our local real estate database Maris, home values by zip code are up from just over a year ago (  2) Mortgage interest rates are still at historic low values, and that alone makes it worthy to review one’s mortgage position.   3) If your home was purchased during the midst of the real estate decline, your home was purchased significantly “cheaper” than the surrounding homes, and if you were required to obtain PMI, you, especially, have a good reason to consider this opportunity.

What is PMI?  I call it a tax, but the lenders call it insurance. Regardless, if you are a purchaser and did not have up to 20% to 25% equity (i.e. cash to invest into your home) when it was purchased, there is a good chance that your lender is assessing you a fee each month for that loan. That fee is called a PMI.  This means you are paying PMI to the lender and you are receiving no credit for this fee toward your principle or interest. In many cases, PMI can be as little as $50 per month or as high as $200 per month.


  Although different home values will work, I will use the scenario below as an example.  Let's say you made your recent home purchase in a predominately $170,000 area. If you purchased the home during the real estate decline, it is totally possible that you picked up your investment at as much as a 12% discount, considering the poor market conditions and the amount of foreclosed properties on the market. Let's also consider that according to Maris, as referenced above in the direct link, some home values in this particular market have increased as much as 14%.  This low purchase price, coupled with the fact that the current home values are up, makes it a prime opportunity to research this opportunity, especially if you had to purchase PMI to obtain your mortgage.


Here is how the numbers play out.  If a home was purchased in this $170,000 area but due to the decline in values the purchase price was 12% less than surrounding values, the purchase price was around $149,600.  Today in this same marketplace, we now see the $170,000 home values currently up as much as 14%.  This means that the value of the home today could be as high as $193,800.  If you had to pay PMI when you purchased this home, the difference of the value of the asset today, less the value when you purchased the asset, is 22.8% of the value of the property. This bodes well with being able to get rid of that monthly PMI charge you pay every month, as that PMI threshold can be anywhere from 20% to 25%, depending upon the lender.  


Of course the opportunity to refinance depends upon many variables (i.e. credit, current home values, appraisals, etc.). However, the financial benefits could prove to be a nice financial windfall if implemented in the near future. Regardless, one must hurry and take a look into the opportunity soon before rates start to rise.


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