Do you have some home equity and want to switch lenders? Here are some tips to help you get a mortgage rate that is right for you.
The main thing you would want is having your mortgage be default-insured. Having an insured mortgage often provides lower rates and many lenders will pay for it themselves by buying what is called a portfolio insurance.
While this isn’t always possible for borrowers as insurers have a bunch of rules that make them unqualified, there are ways to help people qualify for an insurable mortgage including something called “grandfathering”.
Grandfathering is a term used for when you have an existing mortgage that complied with insurance requirements at the time of purchase and can switch to a new lender to qualify for insurance even if it does not meet the standards today.
If you would like to look for ways to get a low-cost insurable mortgage, keep reading!
Properties over $1 million do not qualify for insurance. However, if your home was under this limit, you could be eligible for “grandfathering”.
Refinancing’s cannot be insured, but if you have a mortgage linked to a HELOC (home equity line of credit) aka “collateral-charge mortgage, this allows you to switch lenders and combine mortgage and HELOC borrowing for a new low-rate insurable mortgage.
If you have a mortgage with amortizations of over 25 years, these unfortunately cannot be insured. However, if you originally had a 30-year amortization that is now down to 25 years or less, you can still switch into an insurable mortgage!
Insured mortgages typically ask you to be able to qualify with the new government-mandated minimum qualifying rate sitting at 5.25% currently. If you are not qualified but received your mortgage before October 17, 2021, some lenders will let you receive their actual five-year fixed rate. This reduces your debt ratio on paper and makes it easier for you to get approved.
This applies to you if:
– You are a qualified borrower
– Switching to a new lender
– Having at least 20% equity in your home
– Not increasing the risk of your mortgage
Curious on what to do in terms of your next steps? Don’t hesitate to ask!
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