Floyd Appraisal Works can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. The lender's liability is often only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in the event a borrower defaults on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take countless years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At Floyd Appraisal Works, we know when property values have risen or declined. We're masters at pinpointing value trends in Hohenwald, Lewis County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually drop 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: