Kari Phillips of Southern Fidelity Mortgage was back with us on July 20th as well for another poignant segment about refinancing and the various loan types and mortgage insurance that may accompany them.
Kari advised that when contemplating a refinance there are several things to consider:
1. Look at the equity. Do you have any equity or are you upside down in the home?
2. What is the purpose of the refinance?
3. What’s the normal appreciation rate in Las Vegas; Roughly 2% – 12% depending on the neighborhood here in Las Vegas. This means that if you bought in 2011 it might be worth it to at least take a look at it.
4. Do you have private mortgage insurance? If you have 20% or more in Equity, refinancing will remove that private mortgage insurance.
5. How long do you intend to the live in the home? Kari used the example that if it costs you $2,200 to refinance and that saves you a $100/month on your mortgage payment, it will take you almost 2 years to make up that savings so if you don’t plan on staying that long, refinancing wouldn’t make sense.
Sometimes you can also go back to the original loan servicer that holds your mortgage now and ask them to evaluate your loan to have the private mortgage insurance dropped without having to do a full refinance. Kari did point out that this would require the owner to get and pay for their own appraisal and if it comes back with a clear 20% equity, most lenders would then drop that mortgage insurance off automatically.
The next topic Harvey and Shelley touched on with Kari is the conventional loan changes that will become effective on August 15th that pushes back the timeline from 2 years to 4 years after a short sale or foreclosure for a borrower to obtain new conventional loan. This means if you fall in this category and are on the fence, now is the time to hop off and buy!
The last thing Kari outlined for us was the various types of mortgage insurance that different loan types carry under an array of circumstances:
1. Conventional Loans – Private Mortgage Insurance (PMI) applies if there is less than 20% equity in the property and can be removed through a refinance when 20% equity exists in property.
2. FHA Loans – MIP (Mortgage Insurance Premium) stays on for the life of the loan and can’t be removed unless the property is refinanced to a different loan type. FHA loans are attractive because they require less down (3.5%) than a conventional loan (minimum 5%) and your debt to income ratios can be a lot higher than a conventional loan. In short, it’s a more flexible loan type to get in to that you can always refinance out of at a later date.
3. VA Loans – No mortgage insurance applies for VA loans.
Mortgage insurance is zero benefit for the borrower and is there to benefit the risk that the bank is taking and requiring an extra insurance just in case the borrower foreclosures or short sales. If this happens, the mortgage insurance company will pay off what the bank is owed so they are brought up to what the full amount of the loan was that they gave.
We always love having Kari Phillips of Southern Fidelity Mortgage with us in studio sharing great information with our listeners. Please tune in every Sunday on KDWN AM 720 at 4pm to listen to our latest show. You can also subscribe to our YouTube channel to watch this video along with all the others.