Mitchell Appraisals can help you remove your Private Mortgage Insurance
It's widely understood that a 20% down payment is accepted when buying a house. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser defaults.
The market was working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they obtain the money, and they get the money 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 can a homeowner keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook a little earlier.
Because it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. 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 determining value trends in Navarre, Santa Rosa County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At that 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: