Let D&D Appraisals, LLC. help you discover if you can eliminate your PMI
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower defaults.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower is unable to 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
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little early.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
The difficult thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At D&D Appraisals, LLC., we're experts at determining value trends in Rogersville, Webster County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often 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: