Graham Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. Considering the risk for the lender is often only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value changesin the event a purchaser is unable to 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. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
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. Separate from a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they collect the money, and they get paid 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 can home owners avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook sooner than expected. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things cooled off.
The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Graham Appraisal, we're masters at analyzing value trends in Glasgow, Barren 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 cancel the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: