Daniel Todd Appraisal Services, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when purchasing a home. Since the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value variationson the chance that a purchaser defaults.
During the recent mortgage upturn 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 additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the costs, PMI is lucrative for the lender because they acquire the money, and they get the money 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 can buyers keep from bearing the expense 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. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things calmed down.
The toughest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Daniel Todd Appraisal Services, LLC, we're experts at identifying value trends in Bloomington, Monroe County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that 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: