I recently applied to refinance my ]adjustable-rate mortgage to a fixed rate. My mortgage balance is about $348,000. Is there anything that can be done if I want to fix my ARM to avoid paying private mortgage insurance?
Do not refinance the ARM. Short-term rates are low, thanks to the Federal Reserve’s rate cuts over the last several months. Interest rates will rise eventually. m Consider refinancing to a fixed-rate mortgage that carries lender-paid mortgage insurance (LPMI). For those of you who are unfamiliar, private mortgage insurance (PMI) is a monthly premium paid by the borrower when the loan amount exceeds 80 percent of the property’s appraised value. In lieu of PMI, some lenders offer mortgage programs with LPMI. Instead of paying a separate PMI premium, an LPMI loan simply means that the interest rate is slightly higher.
If your property appraises for $425,000, a conventional loan without PMI or LPMI would have to be limited to 80 percent, or $340,000. m Consider a home equity line of credit. Despite the credit crunch, lenders are still making home-equity loans.