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 generally only the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value variations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Contradictory to a piggyback loan where the lender consumes all the losses, PMI is profitable for the lender because they collect the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer prevent paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to arrive at the point where the principal is just 20% of the original loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners 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 keep up with the market dynamics of our area. At ASAP Appraisal Group, we're masters at determining 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 generally remove the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: