Warren Appraisals can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value variationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the worth of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they acquire the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen homeowners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends signify falling home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Warren Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Jonesboro, Craighead County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: