Associated Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. Because the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variationsin the event a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower doesn't pay on the loan and the market price of the house is less than the balance of the loan.
PMI is pricey to a borrower because 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 consumes all the deficits, PMI is lucrative for the lender because they obtain the money, and they get the money if the borrower is unable to 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 owner refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.
Since it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Associated Appraisal Services, we're experts at identifying value trends in La Place, St John The Baptist County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which 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: