Mitchell Appraisals can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variations in the event a purchaser defaults.
Banks were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy protects the lender if a borrower defaults on the loan and the worth of the home is less than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little earlier.
Considering it can take many years to reach the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends predict 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 hard thing to know. As appraisers, it's our job to recognize 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 MILTON, Santa Rosa County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: