ASAP Appraisal Group can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan covers the lender if a borrower defaults on the loan and the value of the property is less than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.
Because it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things calmed down.
The toughest thing for many homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At ASAP Appraisal Group, we're experts at analyzing value trends in Lakeland, Polk County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At that 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: