Hi,
As part of our client financial review, we’re flagging a few ongoing housing costs that often go years without anyone checking them.
Private mortgage insurance (PMI)
If you put less than 20% down when you bought, you were almost certainly required to carry private mortgage insurance, and it is expensive.
What most homeowners don’t realize is that you may be able to cancel it early and stop paying it altogether.
On paper, there are two ways it ends. You have the right to request cancellation in writing once your balance reaches 80% of the home’s original value, and your servicer is required to drop it automatically at 78%. In practice, we rarely see it come off on its own, so most homeowners have to ask. Both of those thresholds run off what the home was worth when you bought it.
The opportunity most people miss is a third path: if your home has appreciated, a current appraisal may get you there years early.
Fannie Mae permits removal based on current value at 75% LTV once a loan is two to five years old, and at 80% once it’s past five years. The quickest way to see whether it’s worth pursuing is to look at the date of your mortgage and ask whether your home’s value has moved enough since then.
The decision is entirely the servicer’s – they may require an appraisal, a payment-history review, or other documentation, and no outcome is guaranteed.
Your interest rate
While you have your statement out, check the rate. Many homeowners are locked into a rate well above what they could get today, and that’s worth knowing about even if nothing comes of it.
Homeowners insurance
Homeowners coverage is often an item that is overlooked and never evaluated with insurance agents. We recommend that at least every two years you consult with your insurance agent to make sure that you have adequate coverage, and to be sure that they are shopping the coverage so you get the best rate. A lower premium is only worth having if the coverage behind it is adequate.
Reply to this email by Friday with:
- Your current mortgage statement – this is the most useful document, since it shows your loan balance, interest rate, and how much you’re paying in mortgage insurance (Form 1098 works if that’s what you have)
- Your original purchase price and approximate purchase date
We’ll review what you send and schedule an appointment for you with our mortgage partner, who can walk you through PMI removal and whether your rate is worth revisiting.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com