Watson Appraisal Services, Inc can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Since the liability for the lender is often 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 regular value changesin the event a borrower is unable to pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay, different from 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 home buyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy homeowners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things settled down.
A certified, 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's an appraiser's job to keep up with the market dynamics of their area. At Watson Appraisal Services, Inc, we're experts at analyzing value trends in Raleigh, Wake 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 often cancel the PMI with little trouble. 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: