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 often only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value variations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender in case a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they collect the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to understand 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 cancel the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: