Watson Appraisal Services, Inc can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. Considering the risk for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a borrower defaults.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they collect the money, and they receive payment if the borrower defaults, contradictory to 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 homebuyers can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen homeowners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have acquired 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 hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Watson Appraisal Services, Inc, we know when property values have risen or declined. We're experts at analyzing value trends in Raleigh, Wake County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: