James Earp Appraisal Service can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the value of the house is lower 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 frequently isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the deficits, PMI is money-making 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 homebuyer avoid bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart home owners can get off the hook a little early. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
The difficult 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 understand the market dynamics of their area. At James Earp Appraisal Service, we're masters at determining value trends in Raleigh, Wake 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 cancel the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: