Astute Appraisals, Inc. can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is oftentimes only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and natural value changes on the chance that a purchaser is unable to pay.
The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan covers the lender in the event a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they obtain the money, and they receive payment 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 a home buyer refrain from paying 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 reaches 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute home owners can get off the hook a little early.
Because it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify plunging home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things simmered down.
The difficult thing for most homeowners to know 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 understand the market dynamics of their area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Columbia, Howard County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At that 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: