James Earp Appraisal Service can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuations in the event a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in the event a borrower defaults on the loan and the worth of the home is less than what the borrower still owes on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is advantageous 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 home owners keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little earlier.
Because it can take many years to reach the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At James Earp Appraisal Service, we know when property values have risen or declined. We're masters at analyzing value trends in Raleigh, Wake County and surrounding areas. Faced with data from an appraiser, the mortgage company will often cancel 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: