James Earp Appraisal Service can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is the standard when buying a house. Since the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the value of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little earlier. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
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 appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At James Earp Appraisal Service, we know when property values have risen or declined. We're experts at recognizing value trends in Raleigh, Wake County and surrounding areas. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: