Astute Appraisals, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when getting a mortgage. Because the risk for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuationson the chance that a purchaser defaults.
Banks were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than the balance of the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they collect 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 home buyers can prevent paying PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
The hardest 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 definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Columbia, Howard County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. 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: