Moraski Real Estate Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when getting a mortgage. Because the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the value of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they collect 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 homeowners can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook ahead of time.
Since it can take countless years to reach the point where the principal is only 20% of the original loan amount, it's essential to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
The difficult thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Moraski Real Estate Appraisals, we're masters at recognizing value trends in Marshfield, Norfolk County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little effort. At which 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: