Owners Show Concern over Mortgage Insurance, Payments
According to Money Magazine, owners in today’s housing market are faced with a slew of concerns. Here are a few of the questions many borrowers ponder on a weekly basis:
- Do I have enough mortgage insurance?
The housing boom has lifted home values 51 percent over the past six years. For most of us that means that if our house was destroyed, mortgage insurance would pick up only a portion of the cost to rebuild.
For the underinsured, the average shortfall is 21 percent, according to one firm that tracks building prices. Even if you bought a guaranteed replacement or an extended replacement policy, you could still face too-low coverage caps.
To see how much PMI coverage you need, have a contractor estimate the cost of rebuilding. And don’t forget to check your contents coverage, which is often inadequate.
Water is your home’s biggest enemy, and your regular policy won’t cover all types of damage. If you live in a floodplain, you need flood insurance, as well. You’ll pay $1,000 a year on average if you live in an area that’s susceptible.
- Can I afford my mortgage?
Over the next few years, about eight million adjustable-rate mortgages will reset. If yours is among them, you need to decide whether to refinance now or later. Check the fine print on your mortgage to see how bad it can get in the first reset and over the life of the loan.
While it may seem like a no-brainer to go through with mortgage refinancing now, you may not need to rush because rates aren’t expected to climb sharply this year. What’s more, you could pay closing costs of 2 percent to 3 percent of the loan if you take this course of action now.
- Am I paying too much?
Another nagging concern may be that you’re spending money on your house for no good reason. If you bought after July 1998 with less than 20 percent down payment and had to get private mortgage insurance, your lender must automatically cancel your PMI once you’ve paid off 22 percent of the loan.
But price appreciation may help you hit the target earlier.
This annoying fee can run $16 to $50 a month for every $100,000 of debt. However, before you pay $300 or so for an appraiser to prove that your home’s greater value has pushed your home equity higher, understand what it will take to waive PMI.
Mortgage terms vary.