Floyd Appraisal Works can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. Considering the risk for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationsin the event a purchaser doesn't pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy guards the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart home owners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Floyd Appraisal Works, we know when property values have risen or declined. We're experts at determining value trends in Hohenwald, Lewis County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which 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: