Borrower refinances, payment drops more than $ 1,500

Mortgage banker: Terry Hastings

Home value: $ 375,000

Loan amount: $ 337,500

Loan terms: 4.75 percent 30- year fixed

Backstory: Hastings received a call from a customer interested in refinancing. He thought his current rate was high and also had mortgage insurance in his payment. How could he get rid of mortgage insurance? Was it possible to refinance?

Hastings asked him a series of questions to get an idea of his situation. The borrower had purchased his home seven years earlier and was not a U. S. citizen. At the time, his bank allowed him to do 90 percent financing, but because he had little U. S. credit and the non- resi- dency increased the risk, the interest rate was higher than normal. Also, because he borrowed more than 80 percent, he was required to pay private mortgage insurance.

Hastings explained the rules on private mortgage insurance ( PMI). When you borrow more than 80 percent of the home’s value, most banks require you to get and pay for a policy insuring the bank in case you default on the loan.

Once you can prove that you have in excess of 20 percent equity, or naturally pay it down below 78 percent, the pmi falls off. Hastings asked about the home’s value, looked up comparable sales in the neighborhood, and both ple. agreed chances were strong that the new Hastings collected the borrower’s appraised value could eliminate documentation and his bank disPMI. patched a local appraiser to evalu

While getting rid of the PMI was ate the property. The valuation helpful, Hastings recommended confirmed enough equity to remove refinancing the loan to lower the PMI and allow for a refinance. interest rate. Because the borrower Within 30 days, the loan was apnow had established credit, the new proved. rate was much more attractive. Because of the lower rate, lower

In addition, because he was principle to refinance and removal starting a new 30- year loan, his of PMI, the borrower’s monthly payment would automatically drop mortgage payment was now rebecause his principle was now duced by $ 1500. lower. After further discussion, the borrower decided to go with a 10year adjustable lowering his rate even more while still paying princi-

Terry Hastings, Total Mortgage Services, 203- 470- 5434, TerryHastings. com