Is There a Limit to How Many Times You Can Refinance Your Mortgage?

I've learned a lot about personal finance over the years from Jonathan Ping of My Money Blog. One important lesson I learned from his blog posts about refinancing his home is that there's no reason not to refinance your mortgage repeatedly as long as you're coming out ahead each time. So I have, three times in five years. How and why did I do it, and how much money did I save? Find out in my latest Bargaineering post: I’m into serial refinancing … You should be, too.

Everything You Need to Know about Reverse Mortgages

Reverse mortgages aren't easy to understand. They work very differently than the types of mortgages you can get to buy a house. And the way you structure your reverse mortgage, along with life events and housing market conditions you can't predict or control, have a major impact on the amount of proceeds you'll receive and how well a reverse mortgage will help you solve your financial problems or create a more comfortable retirement. 

I've been researching these loans for months for a series of articles for Investopedia. I've read the mortgage lender handbooks, government regulations, government reports, and books by mortgage insiders that lay out the rules on how these loans work. Check out the articles below, where I've translated all that information into language the average consumer can understand to help you figure out if a reverse mortgage is a good idea in your situation and what to look out for. 

Yes, You Can Buy a Home with a Reverse Mortgage

How to Avoid Outliving Your Reverse Mortgage

How to Choose a Reverse Mortgage Payment Plan

Find the Right Reverse Mortgage Counseling Agency

How Regulations Protect Reverse Mortgage Borrowers

5 Signs a Reverse Mortgage Is a Bad Idea

5 Signs a Reverse Mortgage Is a Good Idea

Guidelines for FHA Reverse Mortgages

Reverse Mortgage: Could Your Widow(er) Lose the House?

Protect Yourself Against Reverse Mortgage Scams

Find a Reverse Mortgage Lender You Can Trust

Do You Qualify for a Reverse Mortgage?

Reverse Mortgages and Your Taxes

The FHA's 203(k) loan can help you buy a fixer-upper

Here’s a common scenario that homebuyers face when they want to buy fixer-uppers: The buyers need to finance the purchase with a mortgage, but the mortgage lender will only provide funds for homes in good condition.

In today's market, many foreclosed and short-sale homes need major repairs since their owners couldn’t afford basic maintenance. Buyers who would like to earn sweat equity through purchasing and rehabbing such properties are often shut out of the mortgage market.

But the Federal Housing Administration's 203(k) program makes it possible for these types of would-be owner-occupants to get loans for fixer-upper properties (the 203(k) program is not available to investors).

If you're interested, here are a few things you should know about 203(k) loans:

-A seller might be reluctant to accept a purchase offer that’s contingent on FHA 203(k) financing because of the extra time and uncertainty involved in closing these loans.

-The program allows homeowners to do their own rehab work, but it will hold you to professional standards.

-You’ll be allowed a maximum of 6 months to complete the work whether you hire professionals or do it yourself.

-While loan proceeds can only be used to pay for professional labor--not homeowner labor--doing the work yourself could mean a smaller mortgage.

The FHA 203(k) program isn’t for the faint hearted. It takes two of life’s most expensive and stressful transactions--buying a home and doing major renovations--and adds mortgage lenders and government, two of the most difficult institutions to work with, to the mix.

But this loan program can make an otherwise impossible home purchase a reality for determined homebuyers.

For more information about this type of loan, see my articles: 

The FHA 203(k) mortgage: Home renovation helper

An Introduction to the FHA 203(k) Loan

Applying for an FHA 203(k) Loan

How to Finance a Fixer-Upper

Making Sense of Private Mortgage Insurance

Private mortgage insurance, or PMI, is often bad-mouthed as a terrible deal for consumers.

But without PMI, you might not be able to get a conventional home loan at all.

PMI is required on almost any conventional mortgage when the borrower doesn't make a 20% down payment.

And if you need to pay PMI, you’re in good company. About 25% of loans that closed at the end of last year required it. The younger you are, the more likely you'll need to pay PMI since you haven't had as much time to save.

Thanks to new lending guidelines enacted last December, you can put down as little as 3% these days, not 5%, and still get a conventional mortgage.

Other low-down-payment borrowers probably have just one other option: an FHA loan. The FHA lowered its mortgage insurance premiums in January from 1.35% of the monthly loan balance to 0.85% of the monthly loan balance, but you’ll still be stuck with FHA insurance for the life of the loan, whereas PMI eventually goes away.

Most borrowers will pay less with conventional PMI, but it depends on your down payment, credit score, loan term. Ask your lender to show you all your options. For higher-risk borrowers, the comparisons might look like those in the chart below.

Will you pay less with conventional or FHA?

3% down, $200,000 loan and 680 credit score
Conventional Loan with Private Mortgage Insurance*
FHA Loan with FHA Mortgage Insurance
Upfront mortgage insurance %
Upfront mortgage insurance amount
Total loan amount**
Monthly PMI %
Monthly PMI amount

5% down, $200,000 loan and 680 credit score
Conventional Loan with Private Mortgage Insurance*
FHA Loan with FHA Mortgage Insurance
Upfront mortgage insurance %
Upfront mortgage insurance amount
Total loan amount
Monthly PMI %
Monthly PMI amount
* Based on PMI rates from Radian, Genworth and MGIC.

Most borrowers roll the FHA’s up-front mortgage insurance into the loan balance.

Lenders look at your down payment, credit score and loan to get a number that they multiply against the amount you’re borrowing. The result is the annual cost of PMI. Divide that amount by 12 to get your monthly PMI payment. 

The higher the loan amount and the lower your credit score, the higher the monthly PMI you pay; the closer you get to 20% down and excellent credit, the lower the monthly PMI. 

There are several different companies that sell PMI, but their rates are similar, and you won't be able to choose, anyway. If your lender requires PMI, expect to pay monthly premiums for at least two years. At that point, you can cancel PMI if your home has appreciated enough or you've somehow prepaid enough principal to get to 25% equity.

Otherwise, you’ll have to pay PMI for at least five years and get to 20% equity, or 80% loan to value.

Canceling PMI costs money, too, because requires an appraisal to prove that your home is worth what you say it is. An appraisal might cost you $400 to $500. But don't order the appraisal yourself; your lender must order it directly or you won't be able to use it.

Market appreciation, improvements you’ve made or both could increase your equity quickly. Making extra principal payments is another way to reach the required 80% LTV.

How long will it take you to reach 80% loan-to-value just by making your scheduled monthly payments? Say you're borrowing $100,000 for 30 years at 4%, and your home’s purchase price was $110,000. When your loan closes, you’ll have 9% equity ($10,000 down payment divided by $110,000 purchase price). You’ll have 80% LTV when your loan balance is $88,000 (80% of $110,000).

Here's how to do the math. After plugging the loan amount, interest rate and term into a mortgage calculator, click on the amortization table tab and select the monthly option.

Scroll down until the number in the right column is $87,930 (the first point at which the balance drops below $88,000). Then look at the date in the far left column. In this example, it’s about six years into your mortgage. That's when you can contact your lender about canceling PMI.

(Also, when you sign your mortgage papers at closing, you should have received a disclosure notice providing the date when your loan is scheduled to reach 80% LTV.)

The good news is that federal law requires your lender to cancel PMI once you've paid your loan down to 78% of your home's purchase price, even if your home has lost value. No appraisal is required.

Waiting until you reach 78% means paying an extra year’s worth of PMI in this above example, however. Why not save your money by getting PMI canceled as soon as possible? The interest you'll save is probably more than the appraisal will cost. (You won't come out ahead, though, if your home appraises too low for you to cancel PMI.)

Contact your lender before you reach the 80% mark to ask what the official process is for canceling PMI so you’ll be prepared to ditch it. When you reach 80% LTV, submit your cancellation request in writing, making sure to carefully follow the lender’s requirements.

PMI cancellation, whether you’re at 80% or 78% LTV, is contingent upon your being current on the mortgage and having a timely repayment history. If you’re behind, you’ll have to catch up before your lender will cancel PMI.

To learn more about how much PMI costs, who it really protects and more, see my article, "What you need to know about private mortgage insurance." I've also written 

HGTV's "House Hunters" Finally Explains How Young Homebuyers Finance Fixer-Uppers

When you're just starting out and buying your first home, where do you get the cash to fix it up if it's not already in great condition?

Lots of first-time homebuyers find themselves in this situation: They're ready to own and they have enough income and savings to qualify for a mortgage, but they can barely afford the type of home and/or neighborhood they want to live in, and the home might need lots of improvements and renovations to fix deferred maintenance and outdated finishes.

If you watch House Hunters on HGTV, you've probably seen lots of homebuyers in this scenario. Something that's always bugged me is that the show doesn't explain how a cash-strapped young buyer can afford to renovate a fixer upper.

Finally, last night, I saw an episode called "22-Year-Old Seeks Victorian Fixer-Upper in Pittsburgh" that addressed this issue. The young woman said she had secured an FHA 203(k) loan so she could buy a fixer-upper. She had qualified to borrow $150,000, a sum that would have to both cover the purchase price and the renovations. She ended up buying a $70,000 home, which gave her plenty of funds to improve an old Victorian in an up-and-coming neighborhood.

The episode still didn't get into the details of how the 203(k) program works, so if you'd like to learn about a loan that can help you buy and renovate a fixer-upper, check out my recent article, "How to Finance a Fixer-Upper."