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    How to Refinance your Home to 95% and Not Pay Any Mortgage Insurance Thursday, September 1st, 2011

    Most homeowners today assume they cannot refinance up to say 95% of their property value because they think they do not have enough equity to do so, or if they finance over 80% of their property value the loan will automatically carry mortgage insurance. That is not the case anymore as Fannie Mae is now offering refinancing options up to 95% with No mortgage insurance or No “PMI” for homeowners.  Because of the tremendous opportunity offered by this new program, homeowners can now refinance their mortgage and obtain a interest rate below 4.5%.

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    A good sign for the market

    A good sign for the housing market is that the lenders and the mortgage insurance companies are offering this program to help homeowners. I think we can look at these new refinancing options as a positive sign for our market place, as banks  and mortgage insurance companies are now willing to offer these loan programs that have been unavailable for the past few years. Let’s hope for more of these positive changes.

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    How does this No PMI work?

    So how does this NO MI loan work? It is quite simple. A borrower now has two choices with conventional financing up to 95%. They can either take a loan with MI at say 4.375%, or they can take a slightly higher interest rate at 4.5% and “buy out” the MI, the additional yield on the higher rate pays off the MI so now the buyer has a mortgage payment without any MI. Apples to apples, the loan with the slightly higher interest rate will carry a much lower payment than the loan with monthly mortgage insurance.

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    I think this is one of the better loan programs out there today, as this program now allows a borrower to either #1, refinance and put additional savings back into their pocket each month, or #2 it works really well on purchase loans too, because it now allows the buyer to purchase extra home with the additional monthly savings. For example, because of the expensive MI payments that come with a FHA loan, a buyer is now able to purchase a $400k home with conventional financing with the same monthly payment as a $350k FHA purchase.


    If you are just looking to do a regular refinance and you do NOT need to take advantage of this No PMI loan program, you may be able to qualify for a 3.99% refinance with no points. Check out the savings below. Even if you have a rate at 4.75% you will save $220 a month on a $410k loan, or you can even take a 25 year fixed and still save $13 a month over your current 30 year loan at 4.75%, both of these options will save you over $125k in interest and mortgage payments.


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    Let homeowners and buyers know about this program

    From the majority of people I talk to, many do not know this new program exists, so make sure to let everyone you know who is interested in refinancing or buying a home know about this program. Most homeowners automatically assume you need 20% equity to be able to refinance to get today’s record low rates, or if they don’t have 20% equity the loan will come with monthly mortgage insurance. This is not the case anymore.

    I hope you found this information useful. Feel free to contact me directly at 858-200-9602 if you want to chat about the best way to use this program to meet your refinancing goals. I Look forward to chatting soon.