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 purchasing a home. The lender's liability is often only the difference 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 changes in the event a borrower defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.
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. Separate from a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers prevent bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things settled down.
The difficult thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At James Earp Appraisal Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Raleigh, Wake County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little effort. 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: