Village Appraisal Ltd. can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value changes on the chance that a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they secure the money, and they get paid 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 homeowner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little early.
Because it can take many years to reach the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things cooled off.
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's an appraiser's job to understand the market dynamics of their area. At Village Appraisal Ltd., we're experts at recognizing value trends in Lancaster, Fairfield County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: