People often ask me about mortgage insurance. This month, I’m bringing you good news about the mortgage rates and a quick overview of how you can get mortgage insurance removed from your mortgage so that you can enjoy a lower house payment. Mortgage insurance doesn’t just automatically go away on its own, you’ll need to talk to your lender about getting it removed once you have at least 20 percent equity in your home.
If you know someone that may have enough equity in their home, refer them to us. We’d be happy to help them lower their mortgage payment.
Video Transcription
“Hi, it’s Chris Lamm with Commerce Home Mortgage, and this is the August update.
Thank you guys for tuning in and watching these video market updates; I really appreciate the feedback.
It’s the first week of August and the first thing we are going to touch on is talking about what mortgage rates are doing. It’s something we touch on briefly every single month. Currently, we’re still seeing rates in the low fours and high threes. They are actually doing a little bit better than they were this time last month which is pretty interesting, because last month the Federal Reserve did raise the Federal Fund rate another quarter of a percent.
Now, keep in mind, the Federal Fund rate does not directly impact mortgage rates, but overall it can have an impact on rates over time. What we’re seeing right now is very interesting. Mortgage backed securities, or bonds, that are traded on Wall Street every day … which is what impacts mortgage rates on a daily basis … are actually going up. At the same time, the stock market is having a very significant rally for the last couple days. We have actually hit new levels that we’ve never seen in history. Very, very interesting to see what’s happening right now. Long-term outlook on interest rates going forward, and when I say long-term I mean over the next twelve months … most people still predict that rates are still going to be in the fours. They will go up slightly, but I don’t think they’re going to go anywhere anytime soon. For people that are looking at refinancing right now or purchasing, money is still cheap. A lot of people are getting great rates and very happy with that.
The second topic I wanted to talk about is mortgage insurance. This is a really, really big topic. A week never goes by when I don’t have someone ask me about how mortgage insurance works, what it is, when does it fall off your mortgage … over half the people that we work with here in Shasta County, as well as throughout the rest of the state, when they buy a house, they don’t necessarily put 20 percent down. Now, 20 percent down has historically been the down payment amount that most people would put down to avoid mortgage insurance. Anything less than 20 percent is going to cause you to have to have this lovely thing called mortgage insurance, which is really just an insurance to the lender because if you’re not putting 20 percent down it’s a little bit of a riskier loan, so it insures the loan for the lender, not for you. It’s not to be mistaken with homeowner’s insurance.
The thing to understand about mortgage insurance is that there are a few different types. FHA mortgages have FHA federal mortgage insurance, and that mortgage insurance will stay on the loan for the life of the loan. Many people think it falls off; it never does. It did back before 2009, but currently it will stay on there unless you sell your house … obviously it will go away … or if you refinance into a different type of mortgage, like a conventional mortgage.
A conventional mortgage does have a type of mortgage insurance that can come off of the mortgage without refinancing, but generally speaking, you will have to pay that loan down to 80 percent of its original purchase price. If you bought the house for 200, you’re going to have to pay it down to roughly around $150,000.00mortgage if you’re wanting to apply to have that mortgage insurance removed.
Lastly, it does not automatically go away. That’s a common misconception. Mortgage insurance will stay on your loan no matter what your loan amount is unless you actually engage your current lender who has your mortgage and ask them to remove it. There’s a process to do that.
Hopefully this helps you. If you have any questions on this, you can obviously give me a call.
The last thing I wanted to touch on is just the type of clients that we’re looking for right now. One of the things that I’m very proud of is over 14 years now, here in Shasta County and throughout the rest of the state, we built a business that’s 100% by referral from past clients … past clients referring friends and family to us. One of the things I’m going to try to do once a month going forward is just to let you guys know of some of the things that we’re seeing that are really benefitting people, so you can share that with people that you know.
A lot of people that have bought homes in California over the last five years have experienced a huge uptake in the value of their home, which is a great thing. Many of those people have bought a house with mortgage insurance, which is what we just talked about. A lot of those people don’t know that they may have enough equity right now to get out of that mortgage insurance. A lot of the people that we’re talking with this week are people that bought a home in the last five years. Within five minutes we can usually run some comps, see what their value is, and many of them are surprised that there’s a way to refinance into a better loan option and get away with that mortgage insurance, sometimes saving upwards of two to three hundred dollars per month.
If you know someone like that, or anyone that’s bought a home, the odds are very likely that they may have used a loan like this … that would include a co-worker, a family member, or a friend of yours … feel free to forward this video to them. I would love to talk to them. Generally, in five minutes of time we can figure out if there is an option out there that might be more beneficial for them.
That’s it for this month. I hope you guys have a great August. Back to school is coming up, a really exciting time. If you guys need anything at all, please give me a call here at the office.”