James Earp Appraisal Service can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is the standard when purchasing a home. The lender's risk is generally only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they secure the money, and they receive payment if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little early.
Because it can take many years to reach the point where the principal is only 20% of the original loan amount, it's crucial 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 why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have secured equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At James Earp Appraisal Service, we're masters at pinpointing value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: