Amerappraise, LLC can help you remove your Private Mortgage Insurance
It's largely known that a 20% down payment is the standard when buying a house. The lender's risk is often only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a borrower doesn't pay.
The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the value of the house is less than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's money-making for the lender because they secure the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender takes in all the costs.
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 bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
The toughest thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Amerappraise, LLC, we're experts at recognizing value trends in Bear, New Castle County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally eliminate 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: