Can Refinancing Remove Mortgage Insurance on Your Queen Creek, AZ Home?

If you purchased a home in Queen Creek, Arizona with a smaller down payment, there's a chance mortgage insurance is included in your monthly housing expense.

At the time you purchased, that may have been a worthwhile tradeoff.

Instead of waiting years to save a large down payment, mortgage insurance may have helped you become a homeowner sooner.

But now you've owned the house for a while.

You've made mortgage payments.

And your home's value may have changed.

That leads to a great question:

"Do I still need to be paying mortgage insurance?"

Maybe not.

And depending on your current mortgage, refinancing could be one option worth evaluating.

First: What Is Mortgage Insurance?

Mortgage insurance generally protects the lender—not the homeowner—against certain losses if the borrower defaults.

The exact type of mortgage insurance depends on your loan.

For example, Conventional and FHA financing handle mortgage insurance differently.

That's important because the strategy for potentially eliminating it can also be different.

What Is PMI on a Conventional Mortgage?

With many Conventional loans, mortgage insurance is referred to as Private Mortgage Insurance, or PMI.

If you purchased your home with less than 20% down, PMI may have been required.

Over time, however, your equity position can improve.

That can happen in two ways:

1. You pay down your mortgage balance.

2. Your home's value increases.

If either—or both—have happened since you purchased your Queen Creek home, it's worth reviewing whether PMI is still necessary.

Do You Have to Refinance to Remove PMI?

Not always.

This is important.

Depending on your existing Conventional loan and circumstances, you may have options for requesting PMI cancellation without refinancing the mortgage.

If you already have an excellent interest rate, keeping that mortgage could potentially be much more valuable than refinancing solely to eliminate PMI.

Before replacing the loan, I'd want to see whether there's a simpler way to accomplish the same goal.

FHA Mortgage Insurance Is Different

If you currently have an FHA mortgage, the rules are different.

FHA financing generally uses a Mortgage Insurance Premium (MIP).

Whether MIP can eventually disappear from the existing loan depends on factors including when the loan originated and the original loan structure.

For some FHA homeowners, refinancing into Conventional financing may eventually be a strategy worth considering.

But qualifying for a Conventional refinance and having sufficient equity are only part of the analysis.

The new loan still needs to make financial sense.

Your Home May Have More Equity Than You Realize

Suppose you bought your Queen Creek home several years ago with a relatively small down payment.

Since then:

• You've made regular mortgage payments
• Your principal balance has declined
• The property's market value may have changed

Together, those factors can potentially create a very different loan-to-value position than when you originally purchased.

That's why periodically reviewing your mortgage can be worthwhile.

You may have options today that weren't available when you bought the house.

Don't Refinance Just to Eliminate $100 of PMI

Here's where we need to be careful.

Suppose you're paying:

$125 per month in mortgage insurance.

Eliminating it sounds great.

That's $1,500 per year.

But what if refinancing causes the principal-and-interest portion of your payment to increase because you're replacing a low-rate mortgage with a higher-rate loan?

You could eliminate $125 of mortgage insurance while increasing another part of the payment by even more.

That's not much of a victory.

We need to compare the entire payment, not one line item.

Compare Your Current Mortgage With the New Mortgage

Before refinancing, I would look at:

Current mortgage balance

Current interest rate

Current principal and interest payment

Current mortgage insurance

Estimated property value

Potential new interest rate

New principal and interest payment

New mortgage insurance, if any

Closing costs

Then we can make a meaningful comparison.

What If Refinancing Lowers the Rate AND Removes Mortgage Insurance?

That's where things can become particularly interesting.

Imagine a homeowner who purchased when rates were higher and also has mortgage insurance.

If market conditions and the homeowner's equity position eventually allow us to:

Lower the interest rate

AND

Eliminate mortgage insurance

the combined monthly savings could potentially make refinancing much more attractive.

We still need to calculate the costs and break-even period, but now there may be two sources of savings instead of one.

What If You Have a Great Rate Already?

This is where I would be especially cautious.

If you have a very favorable mortgage rate, don't give it up automatically.

Before refinancing, let's determine whether your existing mortgage insurance can potentially be removed another way.

A low-rate first mortgage can be an extremely valuable financial asset.

Replacing it should have a compelling benefit.

How Do You Know What Your Queen Creek Home Is Worth?

Online home-value estimates can be useful for getting a rough idea, but they're not necessarily the value a lender will use for a refinance.

Depending on the transaction and loan program, the lender may require an appraisal or another acceptable method of establishing property value.

That's why I wouldn't make the entire refinance decision based on an online estimate.

We can start there, but the actual loan needs to be based on acceptable valuation and underwriting requirements.

Should You Wait for Rates to Drop Further?

Maybe.

But you don't have to guess.

We can determine what the refinance would look like today and then establish a target.

For example:

At today's rate, refinancing doesn't make sense.

But perhaps:

If rates improve another 0.50%, eliminating mortgage insurance at the same time could create meaningful savings.

Now you have a plan.

Instead of constantly watching mortgage headlines, you know approximately what you're waiting for.

Why Queen Creek Homeowners Work With Brick Mortgage

At Brick Mortgage, I don't believe the goal should simply be to generate another refinance.

The question is:

Does changing your mortgage actually put you in a better position?

When you work with Jared Halbert at Brick Mortgage, we can review your existing loan, mortgage insurance, estimated equity and potential refinance options.

As a mortgage broker, I can compare multiple lenders and loan structures rather than assuming one refinance option is automatically the best choice.

If refinancing makes sense, we'll know why.

If keeping your current mortgage makes more sense, that's valuable information too.

The Bottom Line

If you're paying mortgage insurance on a home in Queen Creek, don't assume you'll have to pay it forever.

As your mortgage balance decreases and your equity changes, new options may become available.

But don't refinance solely because someone tells you they can "remove your PMI."

Compare the entire mortgage.

If refinancing can reduce your interest expense, eliminate mortgage insurance and provide enough savings to justify the costs, it may be worth considering.

If you already have an excellent mortgage, there may be a better way to approach it.

Let's run the numbers first.

Brick Mortgage, LLC — Serving Queen Creek and All of Arizona
Jared Halbert — Mortgage Loan Officer
480-565-2223