Floyd Appraisal Works can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is common when purchasing a home. The lender's risk is usually only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser doesn't pay.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the worth of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower is unable to pay, 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 can a homebuyer prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required 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 sooner than expected. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends signify plunging home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things cooled off.
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 certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Floyd Appraisal Works, we're experts at identifying value trends in Hohenwald, Lewis County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: