Should I Refinance?

Yep, interest rates are higher than they were this time last year, and those who have already refinanced might have caught the market at a good time. It’s about more than just a rate. The structure of your loan merits attention, too.

Does your current loan

have mortgage insurance?

That’s the monthly amount you pay on behalf of the lender in case of your future foreclosure. If you had less than 20% equity at the time of your loan, or if you took an FHA loan, you are probably paying MI.

Check your mortgage statement for details about how your last payment was applied: Is there any reference to PMI or MIP?

If your answer is “yes”, your next question is for your tax professional. In prior years under certain circumstances, mortgage insurance premiums were considered a tax write off.

You’ll want to know if you are getting a tax break for paying this additional monthly amount.

The higher your income, the less likely you are to get this tax advantage. And since Congress amends the tax rules about this write-off each year, even if you’ve received the break in the past, it’s no guarantee you’ll have it in the future.

Lastly, even though your loan documentation probably had a disclosure about how to get out of MI, your loan servicer doesn’t have to participate.

In days long since past, you could provide an updated appraisal to your loan servicer and if values had increased enough they would remove your mortgage insurance.

Since the mortgage meltdown, that happens much less frequently.

If your current loan has mortgage insurance you might benefit from refinancing now by writing a new loan with no MI.

A review of recent comparable sales would give an idea about your current equity position.

In today’s market, we’ve got loans that use up to 95% of your equity without having mortgage insurance in the monthly payment.

For many borrowers that can mean significant monthly savings.

How do you know what’s right for your situation?

Contact your local mortgage advisor today to run the numbers and quantify your savings.