Private Mortgage Insurance and Your Home Value
A dirty term for those purchasing or refinancing their home is called “private mortgage insurance” or pmi for short. Most borrowers hate hearing that term, but must understand that it is a requirement for conventional and fha loans that exceed 80 percent of the value of the home in question.
For those refinancing, this can be a tough pill to swallow when they think that the value of their home is greater than the true market value. A sweetheart refinance rate and principle-interest payment can be dramatically changed when the appraisal comes in low and knocks the loan-to-value (LTV) ratio above the 80 percent level. Add private mortgage insurance to a higher mortgage rate and the resulting difference in monthly payment can be in the several hundred-dollar range. For this reason, it’s always a good idea to get a firm grasp on the current value of your home before refinancing.
