A lot of homeowners today assume they cannot refinance because they do not have enough equity to do so, or if they refinance a loan over 80% of their property value the loan will automatically carry mortgage insurance. That is not the case anymore as Fannie Mae is now offering a new limited equity conventional refinance program up to 95% of a homeowners property value with No mortgage insurance “PMI”. Because of the tremendous opportunity offered by this new program, many more homeowners can now take advantage of today's record low interest rates.
A good sign for the housing market
A good sign for the housing market is that the lenders and the mortgage insurance companies are now offering this program to help homeowners. I think we can look at these new refinancing options as a positive sign for our market place, as banks and mortgage insurance companies are now willing to offer loan programs that have been unavailable for the past few years.
How does this No PMI work?
So how does this NO MI loan work? It is quite simple. A borrower now has two choices with a conventional refinance up to 95%. They can either take a loan with MI at say 4.25%, or they can take a slightly higher interest rate at 4.5% and “buy out” the MI, the additional yield on the higher rate pays off the MI, so now the buyer has a mortgage payment without any MI. Apples to apples, the loan with the slightly higher interest rate will carry a much lower payment than the loan with monthly mortgage insurance.
Check out the Savings on a Regular Refinance
If you are just looking to do a regular refinance and you do NOT need to take advantage of this No PMI loan program, you may be able to qualify for a 3.99% refinance with no closing costs. Check out the savings below on this scenario. Even if you have a current interest rate at 4.75%, at 3.99% you will save $220 a month on a $410k loan, or you can even take a 25 year fixed and still save $13 a month over your current 30 year loan at 4.75%, but save 5 years off your loan.
Also, check out the "Total Cost Analysis" below on this scenario. The 3.99% 30 year fixed will save over $130k in interest and the 25 year fixed will save over $127k in interest and mortgage payments over the current 30 year loan at 4.75%.
Also, check out the section called "Accumulation vs Reduction". You can see where the loan balance will be in 10 and 25 years for each scenario. In year 25 the current 30 year loan at 4.75% will still have a loan balance of $115,972, whereas the new 30 year and 25 year loan options will be paid off and will have a $.00 balance.
Let homeowners and buyers know about this program
From the majority of people I talk to, many do not know this new limited equity refinance program exists, so let everyone you know who is interested in refinancing or buying a home know about it.
I think this is one of the better loan programs out there today, as this program now allows a borrower to either #1, refinance and put additional savings back into their pocket each month, or #2, it also works really well on purchase loans too, because it now allows the buyer to purchase "extra home" with the additional monthly savings. For example, because of the expensive mortgage insurance payments that come with a FHA loan, a buyer is now able to purchase a $400k home with only 5% down and No MI with conventional financing for the same monthly payment as a $350k FHA purchase loan.
Feel free to contact me directly at 858-200-9602 if you have any questions about this program above. I look forward to chatting soon.
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