Edwards Appraisal Service, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. Because the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationsin the event a purchaser is unable to pay.
Banks were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the worth of the house is less than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's profitable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is just 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast declining home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have gained equity before things simmered 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 tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Edwards Appraisal Service, Inc., we're experts at recognizing value trends in Goldsboro, Wayne 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 cancel the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
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