Deal Appraisal Services can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is common when purchasing a home. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value changes in the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower defaults on the loan and the worth of the home is less than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, unlike 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 avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at falling home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things settled down.
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 difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Deal Appraisal Services, we know when property values have risen or declined. We're experts at analyzing value trends in Kittanning, Armstrong County and surrounding areas. 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 homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: