Broker’s Price Opinion

Home ownership has been an interesting adventure.  From buying the house to maintaining it to making improvements, it’s been an opportunity for Adam and I to learn so much more. 

In my attempt to be the financially savy one of our marriage, I’m always looking for ways to save money.  So I always read any financial magazine that comes in the mail with keen interest.  About 6 months ago, I came across an article on how to save on your home mortgage payment.  Essentially the article said, if you didn’t put 20% down on your home or take out two mortgages (one for 80% and the other for the remainder of the principle that you didn’t put down on your home when purchased), then you’re probably paying mortgage insurance on your home.  We fall into the those who were paying mortgage insurance.  Usually if you’re paying two mortgage payments, then your interest rates are higher than if you’re just paying for one.  At the time we bought our home interest rates were really low and we didn’t want to pass that up.

But the article went on to say that if you’re property value has gone up, it’s likely that you have the 20-25% equity on your home to be able to cancel your mortgage insurance.  So I made a call to our mortgage lender and inquired what it would take to cancel on mortgage insurance.  The first call was not encouraging or helpful as I really didn’t know what all these things meant and the customer service rep didn’t pity my ignorance.  But all he said was it would take $350 to get our house reappraised by someone from their company.  The assessed value by our county appraisal district was not suffient for their records.  So then I asked my big brother who happens to be a chief appraiser for a county in south texas what all this meant and I asked our realtor, Therese’s Godfather and good friend, Jeff Kress, for some further clarification.  Both said I should get it done but have a list of compareable sales for my home to hand to the person that comes out.  These can be obtained from your county appraisal district.  But Jeff sent me some too. 

So after sitting on it and being unsure for a couple of months, I reread the paperwork the mortgage company sent.  Basically the only conditions I could get the house reappraised was if their were “structural” improvements to it–like adding a deck, swimming pool, etc.  Things like re-siding, re-flooring, remodeling a room are not considered structural improvements.  BUT, if there aren’t structural improvements and the market value of the home has increase (i.e. what your home would sell for if you sold it today), one can order what’s called a Broker’s Price Opinion or BPO.  And that only costs $150.  Then I called the mortgage company back to make sure I understood all this correctly, and I did. 

So I sent in my $150 to get the BPO.  Two weeks ago someone came out to take pictures of the house.  I handed him the copies of the compareable sales Jeff sent me and waited. And waited.

Yesterday I checked the mail.  And a revision to our mortgage statement came in!  And it didn’t have the mortgage insurance cost in there anymore!  Woohoo!!!  We’ll be saving $93.24 per month.  Thank you Lord!

I don’t know if this is just a chance you take when you buy a home whether to have one mortgage payment and pay the insurance, or have two and pay the higher interest rates.  I think most people who have done the cost analysis elect for the two payments because they assume they would be paying the insurance until they pay down their principle (for us that would have probably been another 10 or 11 years!) and they neglect or aren’t told about this other option if the market value of the home increases.    Something to consider I suppose the next time you buy a home.