Graham Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is generally only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value variations on the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they obtain 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 buyers can keep from paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook ahead of time. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Since it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things cooled off.
The difficult thing for many homeowners to understand 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 Graham Appraisal, we know when property values have risen or declined. We're masters at pinpointing value trends in Glasgow, Barren County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: