Edwards Appraisal Service, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they obtain the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can keep from bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute homeowners can get off the hook a little early. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to reach the point where the principal is only 20% of the original amount of the loan, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Edwards Appraisal Service, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Goldsboro, Wayne County and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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