This is Mark Warner with propertiesandoptions.com. I would like to comment today on an article that appeared in the Dallas Morning News in December by Scott Burns. Scott tells the story of a family that mortgaged their home. The bought their home the way that most people buy their home and that’s with a mortgage. He talks about how that family, even though the father’s got a second income to try and provide for his family, is stuck in a mortgage at 5.5% and can’t refinance because of the PMI or private mortgage insurance that is on that particular property. With a 19% down payment, PMI is required to ensure the mortgage company won’t lose any money.
No Real Benefit, Just Cost
The insurance you pay benefits the person in no way shape or form. Some of the mortgages that have been done in the past to eliminate PMI have been 80/10/10’s where you have an 80% first where there’s no PMI required and a 10% second which has a little higher payment on a short term, about the equivalent of what a PMI payment would be, but that goes towards you rather than PMI. He didn’t paint a very rosy picture for this particular individual about refinancing, which could drop the interest rate by a point and a half in today’s market, perhaps lower, but the challenge again is that PMI.
Keeping Trying to Refinance
Qualifying for a new mortgage could happen and drop his payment by about $400. What I would say to that particular homeowner is don’t give up because there are a few mortgage products that are coming back into the market that would make it plausible for a refinance. I would search the various options that are out there available to see if you could score a different mortgage that might get you a first mortgage that would be a lot less where you don’t have to bring a lot of money to the table. The options exist, but they’re hard to come by, they’re hard to find, you need to research and check lots of different brokers and bankers to see what programs and products they have out there that might allow you to save a little bit of money on a monthly basis, even with a refinance and not having to come with a lot of cash to the table.
This is Mark Warner with propertiesandoptions.com