Astute Appraisals, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value changes on the chance that a purchaser defaults.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower defaults on the loan and the market price of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original amount borrowed, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Astute Appraisals, Inc., we're experts at recognizing value trends in Columbia, Howard County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: