Watson Appraisal Services, Inc can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's liability is generally only the difference 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 regular value variations on the chance that a purchaser doesn't pay.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan protects the lender if a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's profitable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little earlier.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things calmed down.
The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Watson Appraisal Services, Inc, we're experts at identifying value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: