Daniel Todd Appraisal Services, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when getting a mortgage. The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value variations in the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy protects the lender in case a borrower defaults on the loan and the value of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they collect 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 homeowners refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little early.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's crucial to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends forecast plummeting home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things cooled off.
The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Daniel Todd Appraisal Services, LLC, we're masters at analyzing value trends in Bloomington, Monroe County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. 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: