ASAP Appraisal Group can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when buying a house. The lender's liability is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender if a borrower doesn't pay on the loan and the worth of the house is lower than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they secure 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 avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen home owners can get off the hook ahead of time. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take many years to reach the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends hint at plummeting 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 tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At ASAP Appraisal Group, we're masters at analyzing value trends in Lakeland, Polk County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: