The increase in home values is creating opportunities for many homeowners and a lot of them don't even know it. A high percentage of homeowners bought their home with little or no down payments using conventional and FHA mortgages. In most cases when you purchase a home without using a 20% down payment you will be required to pay for mortgage insurance which is often referred to as PMI or MIP. Basically, mortgage insurance is a fee or charge that you the homeowner pay so that you can obtain a loan and buy a home without having to have a 20% down payment. In most cases, you pay the mortgage insurance as part of your monthly house payment.
Most conventional loans require you to have at least 20% equity in your home before you can have the mortgage insurance remove. Most banks rely on you to simply keep making your monthly payment until you have paid down your loan balance enough to have the 20% equity (some require 22% equity or a remaining loan balance of 78% of the original loan amount). However, there is another alternative that most people aren't aware of and that is when the real estate values increase your equity can grow faster than by simply paying your monthly mortgage. Over the last 3 years in Knox County Ohio, we have experienced an increase in home values of roughly 15% for most homes.
Your monthly mortgage insurance payment doesn't automatically come off of your monthly house payment when your home increases in value. The reason is because the lender doesn't know that your home value has increased so they typically keep charging you the monthly mortgage insurance. However, if you were to obtain a real estate appraisal that confirms you have the required equity in your home you can petition your lender to have the monthly mortgage insurance removed from your loan. The reality is that there are a lot of people who are still paying $50, $100 and maybe even $200 a month towards mortgage insurance when they already have the required equity in their home.
The Sam Miller Team of REMAX Stars Realty 740-397-7800 SamMillerSells.com
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