Appraisal First, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes in the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal First, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Springfield, Greene County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. 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: