Accuracy Matters Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when getting a mortgage. Since the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value changesin the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they obtain the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
The toughest thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Accuracy Matters Appraisals, we're masters at recognizing value trends in South Fork, Rio Grande County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: