A. M. Appraisals can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is accepted when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook sooner than expected.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to understand the market dynamics of their area. At A. M. Appraisals, we're experts at identifying value trends in West Columbia, Lexington County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often remove 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:
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