We realize talking about home financing isn’t a super sexy conversation, nor is it nearly as exciting as awesome landscaping ideas or great neighborhood bars. But before you click that little “x” to close this window, hear us out. This topic is worth exploring because it may save you some cash on your monthly mortgage payment.
Yeah. We thought that might get your attention.
First, here are two important terms to help with this slightly-more-interesting-then-a- snail-race financial conversation.
- LTV: Loan-To-Value is a percentage calculated from the loan amount divided by the purchase price. So, if you put down 15% when buying a home, in simplest terms for this discussion, your LTV would be 85%. And - here’s the important part! - this number decreases over time as you pay off your mortgage loan. This value decrease is a very, very good thing.
- PMI: Private Mortgage Insurance is what a lender will require you to have for your loan if you put less than 20% down on a home.
Here are five ways you may qualify for a lower Loan-to-Value (LTV) thus having your Private Mortgage Insurance (PMI) removed from your monthly mortgage balance - and giving you a reason to pop the champagne.
1. If you are getting ready to buy a home, if you place a down-payment of 20% or more, you may not be required to have PMI written into your loan terms. Each lender has different guidelines, so it’s worth asking about their PMI requirements.
2. Prepay your mortgage loan, aka make extra payments on your mortgage, to build equity in your home.
3. If you remodeled your home or completed a major home restoration project, it’s worth have your home appraised. You may discover the remodel/restoration decreased your LTV.
4. If your neighborhood – or area – has seen an increased value, request a home appraisal.
5. Once your home’s equity reaches 20%, you can request to have your PMI removed (YAY!) – and once it’s below 78%, your lender should remove it if you’ve met all their requirements per the loan and the Homeowners Protection Act.
Have questions? Give us a call!
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