Jane wasn’t rich, but her finances were in good order.  She had been paying on her mortgage for 11 years and paying PMI (Private Mortgage Insurance) all that time.  Her loan was now less than 80% of her loan amount -a great moment.  This meant that she could stop paying Private Mortgage Insurance which was a sizeable amount.  She was paying slightly over $160.00 a month.

Jane contacted her mortgage company.  They told her that she would need an appraisal to verify the value of her home.  She wasn’t worried – She had owned it for 11 years.  Her mortgage company was concerned since housing values were in a state of flux and not a good flux.  So the appraisal was ordered – a few hundred dollars to get rid of Private Mortgage Insurance was a good deal.  She would make her money back in 2 – 3 months.  This would be an excellent return on investment.

Jane was shocked – the value of her home had gone down.  Not by a lot, but it had gone down.  She had expected it to have gone up – it hadn’t.  Now she was over the magic 80% and she would still have to pay for Private Mortgage Insurance at over $160.00 a month.  Jane was mad – she had planned on reducing her monthly payment.  Maybe reducing her interest rate and principal amount would help.  She called me.

Jane’s principal amount would be less, her interest rate would be less, but that nasty Private Mortgage Insurance would still be there.  She just did not like paying it.  What could be done?  I looked into having her refinance into a 15-year FHA mortgage.  It is not well known that with a 15-yr.FHA mortgage there was no Private Mortgage Insurance if the loan was for less than 90% of the value of the house.  That’s right – by reducing the risk to the lender when Jane applied for a 15-year loan the requirements for Private Mortgage Insurance were relaxed.

Jane was tickled.  She was rid of Private Mortgage Insurance and she reduced her rate.  She had been paying on her mortgage for 11 years and was not excited about going back with a new 30-year loan.  She did not want to extend the date when she would own her home free and clear.  Now she didn’t have to.  With a 15-year mortgage she would actually own it sooner than expected.  Jane was rewarded for exploring her options.

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