Is the Mortgage Monkey on Your Back? Here’s How to Get It Off

Here’s how you can shake the mortgage monkey off your back.

Buying a home? Click here to perform a full home search

Selling a home? Click here for a FREE Home Price Evaluation

Many homeowners can’t wait for the day when the mortgage monkey will no longer be on their back. If this is true for your situation, what can you do? 

For one, you can make some extra payments on your loan. Most loans in today’s market don’t carry a prepayment penalty, which means they won’t penalize you for paying extra. Be sure to instruct your lender to allocate that money toward the principal, though, and not the interest on your loan.
 
There are several ways to do this; you can request a bi-weekly payment schedule with your lender. In this way, you’ll be making one extra full payment per year—thirteen as opposed to twelve. You’ll get a little ahead on your mortgage, and the interest will drop accordingly.

Always be sure your lender knows that you want the extra money to be applied toward the principal.

If your lender is unwilling or unable to grant that request, no problem—you can pay extra toward your principal each month. Locate your copy of the amortization schedule you should have received when you purchased your home. Using this, you can determine how much of your payment is going to interest and how much is going to principal. If $950 of your $1,000 payment is going to interest while the other $50 will go toward the principal, you can make that full payment and then write a bonus check of $50 on top of that. You can follow this month to month and chip away little by little at your principal.

If you’ve recently received a year-end bonus at work or you’ve come into some inheritance, you can make a lump sum payment as well. And, again, always be sure your lender knows that the money is to go toward the principal.

If you’d like more information on what we’ve covered today, please send me an email at Charlotte@CharlotteMabryTeam.com. I’d be glad to answer any questions you have!

Private Mortgage Insurance & Its Necessity in the Home Buying Process

Homebuyers seeking a loan product with a down payment requirement of less than 20% need to be aware of this compulsory mortgage insurance.

Buying a home? Click here to perform a full home search

Selling a home? Click here for a FREE Home Price Evaluation

Private mortgage insurance (PMI): What is it, and why should homeowners have it?

PMI can be defined as an insurance policy that homebuyers must take out and pay for when applying for a home loan; it essentially lets your lender know that you won’t default on your home loan.

Lenders require this safeguard when the down payment on a loan is below 20%. So if you’re applying for a home loan of this nature, bear in mind that you’ll need to purchase PMI.

Generally, this insurance will cost you somewhere between $30 to $70 on a monthly basis for every $100,000 that you’ve borrowed.

There is, however, an exemption for VA loans: Veterans applying for a VA loan need not purchase PMI, and are eligible to receive a 100% loan as well.

Today the tradeoff between putting less than 20% down on a home loan and purchasing PMI is virtually unavoidable.

You can get creative with loan products sometimes, though—by applying for an 80% loan, you can add a second mortgage to cover another 10%  and round up the rest through other means. There was a time when this mixing of products was fairly commonplace. Today the tradeoff between putting less than 20% down and purchasing PMI is virtually unavoidable.

But you’re not necessarily on the hook for long—once the loan is down to 80% of your home’s value, you can cancel this insurance altogether. Say you have a $200,000 home and the loan’s balance is $160,000. This means the loan accounts for 80% of your property’s value and, because of this, you’re now able to contact your lender and make a request to terminate your PMI policy.

The lender will send an appraiser out to confirm and, upon confirmation, they’ll remove that payment from the larger mortgage payment.

At any time, if you’d like to know your home’s value in today’s market, don’t hesitate to send me an email at Charlotte@CharlotteMabryTeam.com and I can give you a quick update. I’d be more than delighted to do so!