Positive Home Values on the Horizon - Quicken Loans Zing Blog

It’s no secret that home values have risen considerably from where they were just a couple years ago. But what does this mean for you as a homeowner? Depending on your specific situation, there are many different ways this could impact you and your finances.

You May Be in a Better Position to Sell

Let’s start with the most obvious one. If you’re on the fence or have been waiting to put your home on the market, its value can be a strong influential factor in your decision. Check out this article from MarketWatch, which argues that 2014 is the year to sell your home.

But what if you want to stay put? Then read on because the next sections are for you!

A Cash-Out Refinance May Be a Good Option

If your home value has gone up, you may be able to turn some of that equity into cash. A cash-out refinance allows you to refinance into a new mortgage for more than what you currently owe. The benefit? You can use the difference for pretty much anything.

This may be a good option if you’re in immediate need of some extra money, if you want to pay off high-interest credit card debt or if you’re just looking to make some home improvements to increase the value of your home … the possibilities are endless!

You May Be Able to Get Rid of Your Mortgage Insurance

If you pay private mortgage insurance (PMI) for your conventional loan, or a mortgage insurance premium (MIP) for your FHA loan, an increase in your home value might mean extra savings. If your home’s value has gone up, your loan-to-value (LTV) ratio may have changed, so you might be able to cancel your PMI.

You may be able to request cancellation of your PMI once the unpaid balance of your loan has reached 80%, as long as you meet the following criteria:

  • You must have a good payment history;
  • The value of your home must not have declined below its original value; and
  • There are no other liens on the property, such as a second mortgage.

If your PMI is not canceled at 80%, your servicer must automatically terminate it when your LTV ratio is scheduled to reach 78% based on your initial amortization. This does not apply to investment properties or lender-paid mortgage insurance (LPMI), however.

Also, if you got an FHA loan prior to June 3, 2013, you only have to pay MIP as part of your monthly payment for 5 years or until your loan-to-value ratio reaches 78% (whichever is longer). However, as of June 3, a change went into effect that requires MIP to be paid for 11 years if your original LTV is 90% or lower, or for the life of the loan if your LTV is over 90%.

Your Property Taxes May Increase

Last (but not least), as home values rise and fall, property taxes usually follow suit. If your mortgage lender manages your taxes and insurance for you through an escrow account, your monthly mortgage payment could increase if you need more money in your account to cover your increased property taxes.

If you know there’s a good chance your property taxes will increase, you can make additional payments toward your escrow account at any time during the year to alleviate the potential escrow shortage. Watch this video to learn more about escrow shortages.

Questions? Concerns about rising home values? Let us know in the comments below!

 

Related Posts

This Post Has 8 Comments

  1. Hi,

    I am looking in to the idea of requesting my PMI be dropped, as the value of my home has increased over 100k, putting us well below 80%. My question is, how much does your property tax go up? Does it make smart LONG TERM sense to do this? For example, if my PMI is $120 a month for a fixed number of years but then drops off, keeping a lower property tax, is this better than dropping my PMI but paying a HIGHER property tax indefinitely?

    Thanks!
    Kelli

    1. Hi Clarke,

      Thanks for reading! Under certain circumstances your escrow account can be removed upon request dependent on your loan type, pay history, LTV, next escrow disbursement date and escrow balance. If you’re interested in dropping your escrow account and managing your own taxes and insurance, you can contact our Client Relations Team at (800) 508-0944, option 3, and request to fill out an escrow waiver.

  2. Hi Gregory,
    My principal balance is almost $5,000 below my home’s appraised value at purchase. I too want to be rid of the extra $92 a month for the PMI – I could at least put it toward my principal.
    I asked Quicken a month or more ago about dumping the PMI, and he said if it was removed, my payments would go up.
    Needless to say, I was disappointed….

  3. what about private mortgage insurance? it is my understanding that once my mortgage principal is at %80 or below my home value I can stop paying for this.

    1. Hi Gregory,

      Thanks for your comments! I’ve updated this post to provide some more clarity around how rising home values can affect your mortgage insurance. If you have questions or would like additional information about your PMI/MIP feel free to contact us at (800) 508-0944, option 3, or email us at Help@QuickenLoans.com. Thanks for reading!

Leave a Reply

Your email address will not be published. Required fields are marked *