Floyd Appraisal Works can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is accepted when getting a mortgage. The lender's risk is generally only the difference between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value variations in the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower defaults on the loan and the market price of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers avoid bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little earlier.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things calmed down.
The toughest thing for most home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Floyd Appraisal Works, we're experts at pinpointing value trends in Hohenwald, Lewis 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 often do away with the PMI with little anxiety. At which 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: