Timely Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when buying a house. Considering the risk for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value variationson the chance that a purchaser defaults.
Lenders were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they obtain the money, and they get the money if the borrower defaults, contradictory to a piggyback loan where the lender takes in 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 buyers refrain from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute home owners can get off the hook sooner than expected.
Because it can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, it's crucial 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 why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Timely Appraisal Services, we know when property values have risen or declined. We're masters at identifying value trends in Quinlan, Hunt County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: