ASAP Appraisal Group can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value changes in the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they collect 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 buyers 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 dropped when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little earlier.
Since it can take many years to reach the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners 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 know the market dynamics of our area. At ASAP Appraisal Group, we're experts at recognizing value trends in Lakeland, Polk County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often do away with the PMI with little effort. At that 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: