Category: Refinance

How to Lower your Interest Rate without an Appraisal

How to drop your mortgage rates. No Appraisal Required.

Did you know that many loans do not require an appraisal to drop your interest rate on your mortgage? One of the largest hurdles for people considering a rate reduction refinance is the up-front cost of an appraisal.

The good news is that there are options to lower your rate with no appraisal required!

How Much Does an Appraisal Cost?

Many times, when you get a home loan, an appraisal is required to report to the lender the condition of the home as well as the market value. By law, appraisals are completed by independent 3rd party licensed appraisers.

They typically charge the buyer up front for their services. The cost of an appraisal can vary based on the property location and property type. The average cost of an appraisal is between $450 and $550.

Can I Refinance a Conventional Loan without an Appraisal?

Refinancing a conventional loan can be done without an appraisal. While not all will qualify, Fannie Mae and Freddie Mac both offer property inspection waivers which are eligible on both Purchase Loans and Refinance Loans.

To get a property inspection wavier on a Conventional loan, you will need to have at least 20% Equity (80% Loan to Value). This is because Private Mortgage Insurance companies always require an appraisal to approve the PMI.

NOTE: Not all banks and lenders are able to offer Fannie Mae and Freddie Mac backed mortgages. This means that if you were told you are not eligible by another lender, Riverbank may still be able to help with no appraisal required!

What restrictions are there to do a Conventional Loan without an Appraisal?

There are several restrictions on Conventional Appraisal Waivers Including:

  • No Cash-Out Refinances
  • No Investment Properties
  • Single Family Residences Only (No Multi-Unit Homes)
  • Loan must be under the Conforming Loan Limits
  • No Properties where Adverse conditions are present based on Sellers Disclosure or Inspections
  • No Manufactured Homes
  • No Constructions Loans
  • No Non-Arms Length Transactions
Example Appraisal Waiver Certificate.

Appraisal Waiver Pre-Check

Riverbank Finance LLC can do an appraisal waiver pre-check to see if your property is eligible to refinance with no appraisal required.

We simply need your home address and estimated property value and our software will confirm if you are eligible for an appraisal wavier!

Refinancing a VA loan with no appraisal with an IRRRL

Military veterans that currently have a VA loan on their primary residence may be eligible to drop their interest rate with a VA IRRRL (Interest Rate Reduction Loan).

This streamlined refinance loan required limited documentation to allow veterans to take advantage of lower rates and payments. No Income and No Appraisal and only a mortgage credit rating is required.

Refinance an FHA loan with No Appraisal with an FHA Streamline Refinance

Similar to the VA IRRRL, homeowners that currently have an FHA mortgage may be able to lower their interest rate with no appraisal with an FHA Streamline Refinance loan.

This loan allows a homeowner to take advantage of lower mortgage rates with limited documentation. They may be able to close quickly with no appraisal, no income documentation and only a mortgage credit rating.

What are the Benefits of Refinancing my Mortgage?

Refinancing you mortgage may be a great financial decision. It never hurts to review your options to see if a mortgage refinance is right for your goals.

You may be able to save thousands of dollars in interest payments or pay off your loan more quickly.

Refinance Benefits may Include:

  • Lowering Your Interest Rate – Dropping your rate may save you thousands in Interest.
  • Paying off your home more quickly – Shorten your mortgage term may help you be debt free quickly.
  • Dropping PMI off your mortgage – If your equity has increased you may be able to save on your monthly payment by dropping PMI.
  • Getting Cash-Out for Home Improvements – Tap in your home’s equity for upgrades, family vacations or to get Cash-in-Hand.
  • Consolidating Debt and Lowering your overall Monthly Payments – Pay off high interest debts by consolidating them into your low rate mortgage.

Talk with a Refinance Expert

Riverbank Loan Officers are experts on refinance loan options. We may be able to save you thousands in interest compared to your current mortgage.

Call us today at 800-555-2098 or request information below.

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Free Conventional Appraisals

We have some exciting news! Conventional Appraisals are now FREE for new loans submitted to us from 08/26/2018 that close by 12/31/2018!

Free Conventional Purchase Loan Appraisals

If you are buying a home, then take advantage of the our Free Appraisal program to keep up to an extra $525 in your pocket when we take care of the appraisal expense.  Saving money for your down payment and closing costs can be a hurdle for some home buyers. This is just another way that Riverbank helps to make buying a home affordable for all.

Free Conventional Refinance Loan Appraisals

Many of our clients are finding now as the perfect time to refinance their mortgage. Refinancing with a conventional loan, you will be able to take advantage of our Free conventional appraisal program. Refinance benefits include:

  • Drop PMI
  • Lower your Interest Rate
  • Refinance to a 15 Year Mortgage
  • Consolidate High Interest Debt

To get started with a refinance mortgage with a free appraisal call us at 800-555-2098

Free Appraisal Eligibility & Requirements

  • Conventional Loans Only
  • Eligible for New Applications Submitted on or after 08/28/2018.
  • Loan Must Close on or before December 31st, 2018.
  • Eligible Property Types: Single Family Residences, 2 Units, 3-4 Units, Site Condos, Condos, PUDs (Manufactured Homes Not Eligible)
  • 640+ Credit Scores
  • Appraisal Transfers Not Eligible
  • Program Not Available on Portfolio Loan Products

Not all will qualify. For more information, simply complete the form below or call a loan officer at 800-555-2098.

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GENERAL DISCLAIMER: Program may not be available for all clients applying for conventional financing. Free Appraisal Promotion will be applied as a credit to the borrower’s closing costs on the final closing disclosure as a reimbursement of the appraisal fee limited to a maximum of $525. Appraisal rush fees will not be reimbursed. Loans that do not meet the requirements for this promotional program listed above will not be given this credit and must pay the cost of their own appraisal expenses as required by standard lender requirements. Loans that do not close, for any reason, including withdrawal or denial, will not be given the appraisal credit advertised. All loans must close by the December 31st, 2018 deadline to take advantage of this promotion. Loans that do not close by this date will not be given the promotional credit.

Should I Refinance My Mortgage?

There are several reason why you might benefit from refinancing your home. Many people choose to refinance to simply lower their interest rate while others have goals of doing home improvements or debt consolidation.  Depending on your financial goals, refinancing your mortgage may be a smart choice.

  • Refinance to a lower rate
  • Refinance to a shorter mortgage term
  • Cash Out Refinance
  • Refinance to Drop PMI
  • Debt Consolidation Refinance
  • Refinance a FHA loan to a Conventional Loan
  • Refinance to a Reverse Mortgage

Rate and Term Refinance Loans

A rate and term refinance loan is a mortgage refinance that allows you to change the rate and the term for your mortgage. With this loan type you typically cannot get cash back at the closing.  This the perfect loan type to reduce your interest rate or to pay off your loan more quickly.

Refinancing to a Lower Interest Rate

Refinancing your mortgage to a lower interest rate is the most common type of refinance loan.  The rule of thumb is that if you can recover the costs associated with refinancing by the monthly savings in 3-5 years or less then it may make sense to refinance your mortgage.

With mortgage rates remaining low, there is no reason to pay a high interest rate on your home loan.  Many refinance loans do not even require a home appraisal and may have little to no closing costs.

Refinancing your home loan to drop your interest rate is a no-brainer if you plan on being in your home for the next few years and the monthly savings is enough to make sense for your situation. Ask a loan officer to help determine the time to recover your costs by doing a break even analysis.

Pay Off your Mortgage Quickly by Refinancing to a Shorter Term

If retirement age is just around the corner, you may have a financial goal of paying off your mortgage in the next 15 years. If you are currently in a 30 year mortgage then you may be able to drop your interest rate by going with a 15 year loan term. With the lower interest rates of 15 year mortgages your mortgage payment may stay the same or only increase a slight amount.

The benefit of refinancing to a shorter term mortgage is that your loan would be paid off in a fraction of the time saving you a large amount in interest. You do the math. If you currently pay $1,000 per month for your mortgage but your loan is paid off, that is $12,000 more per year in your pocket! If you save 10 years of payments that adds up to $120,000 which changes your financial picture.

Use our Mortgage Amortization Calculator to estimate the total mortgage interest paid on your loan.

Cash out Refinance Loans

A cash out refinance loan is a mortgage refinance that allows a homeowner to receive cash back from the equity in their home.  Once a homeowner has owned their home for a long enough period to accumulate equity by the increased property values they may have value in their home called home equity.

How can a Homeowner Access the Equity in their Home

To access the equity a homeowner could sell their home and receive the cash proceeds after paying off any mortgages. If a home owner wants to keep their home and get access the equity they have then a cashout refinance may be the perfect fit.

Limitations for Cashout Refinance Loans

Typically cash out refinance loans are limited at 80% loan to value (LTV) for conventional loan or 85% loan to value for FHA however a military veteran can access up to 100% of their homes equity with a cash out refinance.

Debt Consolidation Refinance Loans

A debt consolidation refinance is when a homeowner uses the equity in their home to pay off other debts by refinancing the balance into their mortgage.  This type of mortgage can be used to pay off high interest rate credit cards, personal loans, auto loans or even student loans.  Others may use a debt consolidation refinance loan to pay off IRS tax debt or liens against their property.

The benefit of a debt consolidation refinance would be to lower the overall interest rate and monthly payments of a homeowners debts.  For example if they currently  $1,000 for their mortgage, $300 per month for a credit card and $500 per month for their car loan, they may be able to consolidate their debts into a mortgage and have a payment of $1250 per month. In this example they would bring their monthly payments down from $1,800 per month to $1250 per month for an overall savings of $550 per month. This savings adds up to $6,600 per year!

Refinancing to Remove Private Mortgage Insurance (PMI)

Many homeowners refinance their mortgage to drop PMI, or Private Mortgage Insurance, from their payments. This can be done if you have 80% equity in your home.

Private Mortgage Insurance (PMI) is basically foreclosure insurance that protects your mortgage company in case you do not make your payments. There is not benefit to you as a homeowner having PMI other than it may allow you to initially purchase without a large down payment.

Refinancing from an FHA loan to a Conventional Mortgage

If you currently have an FHA loan then you most likely pay mortgage insurance. FHA requires mortgage insurance even if you were to purchase and place a 20% down payment. With current FHA guidelines, the mortgage insurance never drops off for most FHA loans. For this reason, it may make sense to refinance from a FHA loan to a Conventional Mortgage with no PMI.

Use our Conventional Mortgage Calculator to estimate your new mortgage payment.

How to Drop PMI from your Mortgage

You may need to pay for an appraisal to document your home’s new value as part of the refinance process.  For example, if your home appraises at $100,000 and you only ow $80,000 then you would have $20,000 in home equity which equals 20%.  By refinancing your mortgage with a conventional home loan you would not have PMI on your new mortgage.

Benefits of Dropping PMI from your Mortgage

Dropping PMI could save you hundreds of dollars off your monthly mortgage payments. If you have been aggressively paying down your mortgage balance or if you believe homes in your area have jumped up significantly in value, then speak with a loan officer and review options to refinance and drop PMI from your mortgage.

Other Reasons to Refinance your Mortgage

There are several reasons to refinance your mortgage as shown above. Others may have additional reasons to refinance such as removing a co-signer, changing your loan servicer that has poor customer service, paying down the principal and refinancing to drop the monthly payments, refinancing to a Reverse Mortgage etc. The list goes on!

To review all the benefits of mortgage refinance programs we suggest that you speak with a licensed loan officer. They will help to determine your financial goals and provide information on refinance options to accomplish your goals. Riverbank Loan officers are standing by to help at 800-555-2098 or you may request information by completing the short form below.

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Will changes to HARP hurt or help mortgage seekers?

If you’re seeking to refinance after October 1, 2017, you should know there are some changes coming from Freddie Mac regarding HARP. HARP, or the Home Affordable Refinance Program, is in the waning years of its existence, which is a good thing. How Freddie Mac is changing, in relation to HARP, could be a benefit to those seeking to refinance.

History of HARP

Back during the 2008 Housing Crisis, there was an overabundance of homes that were going under and being repossessed. One reason was because homeowners, who had a home with a LTV (Loan to Value) of over 80%, couldn’t refinance.  Because they still owed 80% or more of the loan, no lender would allow them to refinance. So they were stuck paying a big loan with huge interest rates.

Enter HARP. Harp allowed these homeowners a chance, through Freddie Mac, to refinance their loan and get a lower interest rate with more affordable payments. This allowed homeowners who were in over their heads with their mortgage a solution that didn’t cost their home.

Why the Change?

HARP was never created with the intention of staying around forever.  In fact, one requirement of HARP was that the loan had to be older than 2009 for the homeowner to qualify. Since then, the number of applicants has dwindled, as there are fewer mortgages from before that period in need of HARP.

The good news is both Fannie Mae and Freddie Mac are starting new programs to help homeowners who are underwater with their mortgages. No program existed before 2008. Since then, the government has seen the value in allowing more homeowners options to keep their homes.

Freddie Mac is replacing HARP with what is being called the Relief Refinance Mortgage. One key difference is that there is no requirement that the loan must originate before 2009. So if the loan is more recent, a homeowner can take advantage.

Do you Qualify?

Homeowners could qualify for a Relief Refinance Mortgage if they meet the following requirements:

  • The mortgage must be at least 15 months old.
  • The borrower should not have any delinquent payments in the past six months.
  • They can only have one delinquent payment in the past year.

 

Keep in mind, those three requirements aren’t the only ones, but they are the biggest obstacles to qualifying for the Relief Refinance Mortgage, according to Freddie Mac. Homeowners who do meet those qualifications can contact a Riverbank Finance Loan Officer (1-800-555-2098) for more information about getting relief in the form of a refinanced mortgage.

 

Are Adjustable Rate Mortgages Still Too Risky?

I know what you’re thinking: Why would I ever want to get an Adjustable Rate Mortgage? Isn’t it too risky? Sure, it could be. But there are actually some circumstances in which it might be the best option. Let’s look at the pros and cons of ARMs, and you can decide whether it’s too risky or just the right fit for you.

Benefits of ARM Loans

When you choose an ARM, your mortgage rates and payments start out lower at the beginning of your loan and have the potential to gradually increase over time.  Because of the lower payment at the outset, you could qualify for a larger or more expensive home than you originally thought possible.

If you are planning on selling your home in a few years, an ARM may be your best option because you can lock in your low payment at a fixed rate for three or five years. Having that low payment may save you thousands of dollars more than you would with a traditional fixed rate mortgage.

Let’s say your ARM monthly payment is $200 less than you’d pay had you gone with a traditional mortgage. If you decide to invest that $200 you’re saving, you could end up earning interest instead of paying interest on your monthly savings. 

Also, with an ARM, you never have to refinance your home. After the initial three or five years with the locked-in fixed rate, the interest rates could drop on their own without you having to pay closing costs and refinancing fees.

Downsides of ARM Loans

With an ARM, your mortgage rate typically fluctuates with the economy after the first three or five years, depending on what kind of ARM you choose. When the interest rate adjusts, so does your mortgage payment. Your payment may go up or down depending on the current rate environment at the time of your adjustment period. If rates go up, your mortgage payment may rise accordingly. For your protection, Adjustable Rate Mortgages have built in Caps which will limit the potential increases in the rates.

With one type of ARM, a negative amortization loan, the minimum monthly mortgage payments may not include the full interest amount so they can be more affordable for borrowers. So, the unpaid interest gets tacked onto your principal balance. In this case, you’ll end up paying more on your overall mortgage — even if you make all your payments in time.

Generally, ARMs can be confusing. Thankfully, the Consumer Finance Protection Bureau has created a great Adjustable Rate Mortgage Resouce Book that explains the ins and outs of how they operate.

If an ARM still sounds too risky for you, you can always opt for an FHA, VA, USDA rural development loan, or conventional 15 to 30-year mortgage.

As long as you understand how it works and plan your finances accordingly, an ARM could be a great fit for you. Schedule an appointment with one of our mortgage professionals at (800) 555-2098 for more information or to find out which kind of loan best fits your needs.

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Loans for Veterans

Three years after the Civil War ended, Memorial Day was established to honor our veterans on the last Monday of May every year. But that’s not the only thing the US Government has done for veterans. Started in 1944, the VA Loan program makes the burden of getting a mortgage easier for qualifying veterans and surviving spouses.

No Down Payment Mortgage

One hurdle home buyers often face in getting approved for a mortgage is the seemingly insurmountable down payment. However, if you’ve served our country in the armed services, you don’t need a down payment! Traditional mortgages can require up to 20% for a down payment. That is a potentially huge weight off a buyer’s shoulders!

It Gets Better for Veterans

VA Loans have other added advantages over conventional financing. The loans are backed by the US government. That benefit is especially helpful for veterans with bad credit. A buyer can have a credit score as low as 580 and still get approved.

Another benefit of the loan being government-backed is that it doesn’t require private mortgage insurance (unlike FHA loans). Any other kind of loan, with less than a 20% down payment, must have Private Mortgage Insurance. PMI protects the lender in case of a default, but in a VA Loan, the government acts as the insurance.

Use our VA Mortgage Calculator to estimate monthly payments.

Sign Up, Soldier!

So how do you get a VA mortgage? The first step is to get a Certificate of Eligibility from Veterans Affairs (We can do this for you with a quick phone call), to show that you are eligible for the program. Once the certification is received by a loan officer and processed (most are instant however manual COE’s can take 5-10 business days), the loan goes for pre-approval. You could qualify for up to a $453,100 loan. Your dream home might be more within reach than you think.

Riverbank Finance offers both 15 and 30-year VA Loans. We can review the benefits of both VA loan terms to find the right fit for your family. Apply for a VA Loan online or in person at our office. Our offices are also handicap accessible making it easy for disabled vets.

VA Refinance Loans

If you already own a home and qualify for a VA Loan, you also can benefit from refinancing through VA Loans. Like other VA Loans, this program was set up with easier qualifications and benefits than a traditional loan. For refinancing, this means that you can cash out up to 100% of the value of your home. So if you haven’t taken advantage of VA Loans in the past and have a remodeling project you’ve been putting off, now is the time. These are benefits you earned for serving our country. Use them!

We, here at Riverbank, are thankful for our armed service members. We feel honored every time a veteran seeks a loan through our services and strive to make the process as easy as possible.

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VA Loans Just Got Better

 

For eligible servicemembers, veterans, and surviving spouses, the existing VA home loan program just got better! The Department of Veterans Affairs (VA) has introduced a new policy regarding how student loan debt affects mortgage eligibility.

Related: VA Loans for Military Veterans

VA loosens Guidelines for Student Loans

The new policy makes it easier for VA eligible borrowers to obtain a purchase or refinance loan, by changing the way student loan monthly payments are calculated. Prior to this change, 1% of the total student loan debt had to be counted toward the borrower’s debt-to-income (DTI) ratio each month, regardless of actual monthly payment structure or deferment. Now, however, the payment will be calculated based on 5% of the total student loan debt, divided by 12 months. Clear as mud, right?

Lets do some math!

For example, lets say John has $65,000 in student loan debt. Formerly, his monthly student loan payment would have been $65,000 * 1% (.01) = $650. Now, his payment will be $65,000 * 5% (.05) / 12 = $271.

What if John is on an income-based repayment structure, and only pays $250 per month? The new policy also allows a statement from John’s student loan servicer to be provided, allowing the calculated payment to reflect the actual loan terms.

What if John’s student loans are in deferment? If his repayment is scheduled to begin within 12 months from the estimated closing date, we must use the 5% / 12 months rule. If not, however, the payment can be omitted altogether if written evidence can be provided that repayment will be deferred at least another 12 months from the closing date.

By changing the way student loan payments are calculated, more VA eligible borrowers will qualify, and for a larger amount. Check out our VA Mortgage Calculator to estimate your monthly payment on a desired home purchase.

What is a VA home loan?

VA home loans are originated by private lenders, banks, and mortgage companies, but the VA guarantees a portion of the loan, allowing us to offer you more favorable terms. VA purchase loans help you buy a home with a low interest rate, without requiring a down payment or private mortgage insurance (PMI). There are also special VA loan programs for Cashout and Streamline Refinances.

Who is eligible for a VA home loan?

Active servicemembers, veterans, and surviving spouses are eligible for VA home loan programs, with a valid certificate of eligibility (COE). Length of service or service commitment, duty status and character of service determine each veteran’s eligibility for specific benefits. All VA borrowers are still subject to the minimum credit score requirement of 580 and sufficient income levels to cover expected monthly obligations. For more specific information on eligibility and requirements, visit the VA benefits website.

For More Information Visit the VA Student Loan Announcement.

Get More Information

To apply for a VA Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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Should I Payoff my Mortgage Early?

 

Should I pay off my mortgage early? How much money will it save me? How much extra should I pay each month? If I pay an extra one hundred dollars each month, when will my mortgage be paid off? As you can imagine, we get these questions a lot. They are all excellent questions, but the answers vary depending on the homeowner. Here, we’ll address some things to consider before paying off your mortgage early.

Debt-free living sounds like a dream, but even if it is financially feasible, is it the best choice for you? Paying off your mortgage early will save you the interest expense you would have incurred over time; and the higher your interest rate, the more you stand to save. If your interest rate is low, however, sending any excess cash to your mortgage servicer may not be your best option.

Related: Refinance your mortgage with FHA Streamline

So, what else could you do with that extra cash? Speak to your financial advisor about your goals for retirement. When discussing investment options, you may be surprised to hear that the expected return on some portfolios may be greater than the savings you’d see by paying your mortgage off early.

How long do you plan to stay in your home? If you’re still in your first home, and you don’t anticipate ever paying off the mortgage, it doesn’t make much sense to overpay. Conversely, if you’re in your ‘forever home’ adding a little extra to your monthly payment could mean significant savings down the road.

When it comes to debt, mortgage debt is the best kind of debt to have, but let’s be honest—it’s still debt. If it’s going to help you sleep at night, and you can afford to payoff your mortgage, then by all means, do it! Have a mortgage burning party! Apparently that’s a thing.

So you’ve weighed your options and decided to pay down your mortgage—great! Use our amortization schedule calculator to determine how much sooner you will pay off your loan by paying extra monthly. Enter your total loan amount, interest rate, loan term, and open the advanced calculations to add your extra principal payments (monthly). After you click calculate, scroll down to see the number of months it will take to pay off your mortgage.

Let’s say, for example, you have a 30-year mortgage of $160,000 at a 4.25% interest rate. If you pay an extra $100 each month, you will pay off your loan in approximately 289 months, or 24 years.

Get More Information

To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

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How to Ensure a Fast Mortgage Closing

If you’ve ever purchased a home, you know how stressful the process can be. What should be an exciting experience can quickly turn to panic, as the target closing date approaches. So, what can be done to prevent delays along your path to homeownership? Check out our list of tips and tricks below to meet (or beat!) your closing date.

Get Pre-Approved. Never shop for a home without first speaking with a mortgage loan officer. You wouldn’t want to fall in love with a home you may not be able to afford.

Tell the truth. Be 100% honest and transparent with both your mortgage loan officer and your Realtor. If you provide incorrect or incomplete information, it could cause major problems during the underwriting process.

Work with professionals. Find an experienced Buyer’s Agent to represent you and help you negotiate. It will make all the difference.

Be Responsive. Always send required documents within 24 hours of our request for them. Always send complete documentation (all pages). Be sure they are legible and not cut off. The Underwriter will conduct a thorough review of all documents provided by the borrower, realtor, loan officer, and title company. Additional document requests throughout the process are completely normal and necessary to close.

Ask Us Questions. Review all documents that you receive and let us know if there is something you do not understand. It is important to be aware of all costs associated with your mortgage.

The Appraisal. The appraisal is a required out-of-pocket cost to the borrower which generally ranges from $400 to $600. This must be paid when ordered via credit or debit card. If repairs are required by the appraiser, a final re-inspection will be required, which is an additional out-of-pocket cost to the borrower of approximately $150-$175.

Be patient. The total time to complete the mortgage process varies by loan program, property type, and borrower qualifications. You can expect 30-60 days from application to closing, but the process may take more or less time depending on the situation.

Don’t Jeopardize your Approval. DO NOT deposit large amounts of cash into your bank account. DO NOT transfer large amounts of money between accounts. DO NOT apply for new debt. DO NOT have your credit pulled. DO NOT change jobs or pay structure.

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Get More Information

To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

Request Information Now!

How to Get Rid of Mortgage Insurance

How to Get Rid of Mortgage Insurance

So you want to break up with your monthly mortgage insurance—we don’t blame you! When you purchased your home, there’s a good chance you didn’t have 20% to put down, right? Mortgage insurance is a great option, in that it allows buyers to increase their purchasing power, but comes with an unfortunate side effect of additional monthly fees.

Every situation is different, so it is important to understand your loan, to determine your options for dropping your mortgage insurance. Below are the greatest factors affecting your ability to say “Sayonara” to your mortgage insurance (MI).

• Type of mortgage insurance you’re paying
• Which lender holds your loan
• Age of your loan (time since closing)
• Your loan-to-value ratio (LTV)
• The property type
• Whether or not your property value has increased

Types of Mortgage Insurance

If you’re paying a monthly fee on a conventional loan, it is called private mortgage insurance (PMI). If you paid an upfront fee at close and a monthly fee on an FHA loan, it is called a mortgage insurance premium (MIP).

Who Owns Your Loan?

If you have a Conventional loan, is it Fannie Mae or Freddie Mac? This is important because they have different rules for when MI can be removed. If you have an FHA loan, you will need to know its age and the percentage of down payment you gave at close.

What is Your LTV?

The Loan-to-Value ratio is essentially the financed amount divided by your home’s value, expressed as a percentage. Let’s say for example that you purchased your home for $200,000 with 10% down ($20,000). You financed $180,000 of the $200,000 purchase price, which gives you a loan-to-value ratio of 90%. Your LTV will decrease as you make payments, as well as when your property value increases.

Has Your Property Increased in Value?

If you’ve made considerable improvements to your home, it has probably gone up in value! You’ll need to order a new appraisal to confirm the updated value, which generally costs between $400-$600 out of pocket.

Related: Refinance Your Home Without an Appraisal

Canceling MIP on your FHA Loan

If you closed on your loan on or after June 3, 2013 and you put less than 10% down, MIP can never be removed. With a down payment of 10% or more, you’re still required to pay MIP for a minimum of 11 years. If your loan closed before that date, your MIP will be automatically cancelled when your LTV reaches 78%, but only after you’ve paid the MIP for a minimum of 5 years, and only if you have not had any late payments in the last year. In most cases, the only way to stop paying MIP on an FHA loan is to refinance your mortgage.

Canceling PMI on your Conventional Loan

Ditching the PMI on a conventional loan is easier and more flexible than on an FHA loan. Your MI will be cancelled automatically as soon as your LTV reaches 78% OR when you reach the midpoint of your mortgage (15 years into a 30 year mortgage). Again, you must be current on your payments for the cancellation to occur.

If you pay close attention to your mortgage statements and are anxious to kick your MI to the curb, you can request cancellation once your LTV reaches 80%. It is also important to note that while Fannie Mae allows homeowners to make extra payments to get to 80% LTV faster, Freddie Mac does not.

As mentioned above, if you’ve made considerable improvements to your property, you may be able to remove PMI much sooner. You’ll need to order a new appraisal to document all improvements, but as long as your LTV is below 75% or less (for Fannie Mae) or 80% (for Freddie Mac), your PMI will be removed!

Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Get More Information

To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.

Request Information Now!