Much has been made about the lending changes set to take effect in the next few weeks. For some, this could have a big impact on their current situation. Others, however, will neglect to pay attention to the changes at all. Regardless of your current situation, it is important to know where your current mortgage stands and what options have been made available. Most homeowners do not know what their home is worth, their interest rate or what they owe on their mortgage. There are more options than you may think that can either lower your principal balance or your monthly payment.
Many refinance options are off the table if the value is not there. How you are coming up with this value could make all the difference. If you are looking at Zillow or other property valuation sites, you may be missing the whole story. The best way to determine value is to see what properties have sold for in your immediate area over the past 45-60 days. If you have bought or sold real estate in the past, you should have a friendly relationship with a realtor. Give them a call and ask them to pull some comps and see where your value may be. You will owe them a favor, but you will also have a much better idea of exactly where you stand.
Even if traditional refinancing is out of the question, you may have options with the HARP or HAMP programs. These are refinancing programs that are focused on borrowers with minimal equity and are paying a higher than market interest rate. Most of the information may be available on your lender’s website, but your local mortgage broker or lender has access to these programs as well. If you have been denied for these loans in the past, now is a good time to contact them again, as new changes have been made to the programs and guidelines.
Many borrowers are not aware that the private mortgage insurance (PMI) is only applicable until your property has 78% equity. If you have bought in the past five years and think your value has gone up due to property improvements or changes in the market, contact your lender and see what your options are. In most cases, you will need to document the increase in value with an appraisal. If the lender accepts it, the PMI will be immediately eliminated. If you have paid the mortgage on time for the first 5 years (60 payments), the lender may eliminate it as well. It is best to contact your lender and find out exactly what your options are.
There are little tricks to reduce your principal such as making one extra mortgage payment a year to reduce a 30 year mortgage down to 23 years and adding extra to each monthly payment. If you have a mortgage, it does not mean that you are out of options. Between your current lender and the government programs currently available, you may be able to lower your payment significantly.