28
Aug
By Mike Pfefferman
Mortgage Tips

What Homeowners Should Know Before Removing Mortgage Insurance

Mortgage insurance can make homeownership accessible with a smaller down payment, but many homeowners eventually wonder whether it can be removed. The answer depends on the type of mortgage you have, your loan balance, property value, payment history, and the rules that apply to your specific loan.

Understanding those factors can help you know what questions to ask your loan servicer.

Start by Identifying Your Loan Type
Mortgage insurance does not work the same way for every mortgage program. Conventional loans may have private mortgage insurance, commonly called PMI, while government-backed loan programs can have different types of mortgage insurance and different rules regarding how long it remains in place.
Before making plans, identify your loan type and review the requirements that apply to it.

Equity Can Play an Important Role
For certain conventional mortgages, the relationship between your remaining loan balance and the home’s value can affect when PMI may be eligible for cancellation.

Equity may increase as you pay down your mortgage or as your property value changes. However, an increase in estimated market value does not automatically mean mortgage insurance will immediately disappear.

Payment History May Matter
Your servicer may review whether your mortgage payments have been made on time before approving certain cancellation requests.

Other requirements may also apply depending on the loan, including seasoning periods, property condition, or confirmation that there are no additional liens against the home.

An Appraisal May Be Required
If you believe increased property value has created enough equity to request removal, your servicer may require a new valuation or appraisal.

Do not order one independently before contacting the servicer. Ask what process and documentation are required so you do not pay for something that will not satisfy their requirements.

Contact Your Loan Servicer
Your servicer can explain the rules associated with your specific mortgage, including whether mortgage insurance can be removed and what steps are necessary.

Mortgage insurance is an important part of many home purchases, but it does not always remain forever. Understanding your loan and monitoring your equity can help you recognize when it may be appropriate to explore your options.

27
Aug
By Mike Pfefferman
Mortgage Tips

How a Large Down Payment Can Affect More Than Your Monthly Payment

When buying a home, it is natural to assume that putting as much money down as possible is always the best financial decision. A larger down payment can provide meaningful advantages, but it also affects more than the size of your monthly mortgage payment. Understanding the broader impact can help you decide how much cash makes sense to use at closing.

A Larger Down Payment Reduces the Amount You Borrow
The most obvious benefit is a smaller loan balance. Borrowing less generally means a lower principal-and-interest payment and less interest paid over the life of the loan, assuming the other loan terms remain the same. Depending on the mortgage program and down payment amount, it may also affect mortgage insurance requirements.

It Can Change Your Loan Options
Down payment size may influence the mortgage programs, pricing, or terms available to you. Different loan products have different requirements, so it is worth discussing several scenarios with your mortgage professional rather than automatically choosing one down payment amount.

Consider the Cash You Will Have Left
Putting additional money into a home means that money is no longer readily available for other expenses.
Closing costs, moving expenses, furnishings, repairs, and unexpected homeownership costs can arrive quickly after closing. Maintaining adequate savings may be more valuable to your household than using every available dollar to reduce the mortgage.

Think About Other Financial Priorities
Your available cash may also be competing with higher-interest debt, emergency savings, retirement contributions, investments, education expenses, or other goals. The appropriate down payment should be considered within your complete financial picture rather than as an isolated decision.

Compare Multiple Scenarios
Ask your mortgage professional to show you how different down payment amounts affect the loan balance, estimated payment, mortgage insurance when applicable, and cash needed at closing. Seeing the numbers side by side can make the tradeoffs much easier to understand.

A larger down payment can be a powerful financial tool, but bigger is not automatically better for every buyer. The goal is to find a balance that creates an affordable mortgage while leaving you financially prepared for everything that comes after you receive the keys.

25
Aug
By Mike Pfefferman
Mortgage Tips

What Happens to Your Mortgage When Property Taxes Are Reassessed?

A fixed-rate mortgage provides predictability because your interest rate and principal-and-interest payment remain consistent. However, that does not necessarily mean your total monthly housing payment will stay exactly the same. Property taxes can change over time, and when they do, homeowners who pay taxes through an escrow account may see their monthly mortgage payment change as well.

Why Property Taxes Are Reassessed
Local governments use property assessments to help determine how much homeowners owe in property taxes. Depending on where you live, reassessments may occur periodically, after a property is sold, following major improvements, or because of changes in local property values.
The rules vary considerably by location, which is why buyers should understand how assessments work in the area where they are purchasing.

What Happens When Taxes Increase
If your lender or loan servicer collects property taxes through escrow, a tax increase means more money will need to be collected each month to cover the higher annual bill.
Your servicer generally performs an escrow analysis to determine whether the amount currently being collected is sufficient. If it is not, your escrow portion may increase.

An Escrow Shortage Can Also Affect Your Payment
Sometimes a tax increase creates an escrow shortage because the account did not contain enough money to cover the new bill. Depending on your loan and servicer, you may have options for addressing that shortage, such as paying it separately or spreading the amount over future payments. Your regular escrow contribution may also be adjusted to reflect the new tax amount.

Plan for Changes Before You Buy
When evaluating affordability, do not assume the seller’s current property tax bill will necessarily become your future tax bill. Ask your real estate and mortgage professionals about property tax considerations in your area and include potential changes in your homeownership budget.

Review Your Escrow Statements
Your annual escrow analysis provides valuable information about taxes, insurance, account balances, and changes to your monthly payment. Reviewing it carefully can help you understand why an adjustment occurred.

A fixed interest rate can provide valuable stability, but property taxes remain a separate part of your housing expenses. Understanding how reassessments work can help you budget more accurately and avoid being caught off guard by a future payment change.