Error processing SSI file
Error processing SSI file
Lowering your monthly mortgage payments
by Julie Ferguson, Membership Development Manager (First Tech Credit Union)
The trick is in the PMI
When you buy a new home, especially first-time homebuyers, you rarely put down 20 percent of the home's value. So, you end up paying Private Mortgage Insurance (PMI) every month. PMI is insurance against the loan going into default; in other words, it's insurance for the lender just in case you default on the mortgage and foreclose.

But since neither you nor the lender get anything out of PMI financially, eliminating PMI from your monthly mortgage payment is strongly suggested. Doing so usually reduces your payment by $100 or more. Nothing to sneeze at right?

But, that still leaves a very big question: Aside from going back in time and putting down a larger down payment when you first buy the home, how do you eliminate PMI?
The trick
Most homeowners think there's a trick to eliminating PMI from their lives. Really, that's not true. One easy way to do it is to pay a little extra each month. Doing that will get you to the 20 percent marker faster. And once you reach the 20 percent, be sure to call your mortgage lender. Not every lender automatically eliminates PMI at 20 percent. Only when it hits 22 percent are they required by law to eliminate it. But per your request, they will do so when you reach 20 percent.

Then there's the second method that requires a bit more finesse - get a property value assessment. If you live in a desirable neighborhood, or if your yearly taxes keep going up, chances are the value of your home has increased. In just a couple of years, your home could be worth a lot more. Which, when mixed with a perfect payment history for two or more years and no late fees, could bring your "amount owed" and "amount paid" to that magical 80 percent and get rid of PMI.

Knowing what your home is worth
The best way to know what your home is worth is to ask a real estate agent. If you don't know one, call a local office and ask for one that knows your neighborhood. Even if you're not in the market to sell your home, a good agent knows that building a relationship now may mean that you'll use them to sell your home in the future. Ask the agent for a Comparative Marketing Analysis (CMA). This report will show you home prices in your neighborhood that are currently on the market or have recently sold.

Or, if you want to do it on your own, go online and do a search for "home value" sites. You'll find a wide assortment to choose from. Most will ask for an address, zip code and will give you the values of many homes sold in your area, how much they sold for and what your estimated value might be. However, it's not as perfect a gauge as a real estate professional.

Getting a property value assessment
Once you think you're ready to have your home's value assessed, give your home loan lender a call and ask them about eliminating your PMI. Once they agree to help you eliminate the PMI, they'll send an appraiser to your home. An appraiser could cost upwards of $300 to $450, but when the report comes back that your home is worth enough to eliminate the PMI, that cost will be well worth the expense. When the appraiser shows up, be sure to have all receipts from any home remodels/upgrades you've done. This will help the appraiser better understand what your home is worth.

(Want more money saving tips and home loan advice? Visit First Tech, or call 800.637.0852 and talk with a First Tech Mortgage Department rep.)

Error processing SSI file