Mitchell Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is usually 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% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the worth of the property is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they secure the money, and they receive payment 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 home buyers can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook sooner than expected.
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 essential to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things simmered down.
The hardest thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Mitchell Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in MILTON, Santa Rosa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: