James Earp Appraisal Service can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is accepted when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes in the event a purchaser defaults.
Banks were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the value of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook sooner than expected.
Because it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has grown in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At James Earp Appraisal Service, we're experts at pinpointing value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: