can help you remove your Private Mortgage Insurance
It's widely inferred that a 20% down payment is accepted when buying a house. The lender's liability is usually only the remainder between the home value and the sum due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen home owners can get off the hook sooner than expected.
Since it can take many years to reach the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends indicate declining home values, you should understand that real estate is local.
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 hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At , we're experts at pinpointing value trends in , Clark County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. 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: