Appraisal Services of Brandon, Inc . can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's liability is generally only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower defaults.
During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they acquire the money, and they get paid 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 homeowners can prevent bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends predict plunging 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 settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Appraisal Services of Brandon, Inc ., we know when property values have risen or declined. We're masters at identifying value trends in Valrico, Hillsborough County and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: