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 often only the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a borrower defaults.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. Different from a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they obtain the money, and they receive payment 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 home buyers can refrain from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart homeowners can get off the hook beforehand. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've acquired 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? Despite the fact that nationwide trends hint at falling home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things calmed down.
The toughest thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At A. M. Appraisals, we're experts at pinpointing 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 generally eliminate the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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