Boston Mountain Real Estate can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value changes on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen homeowners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things calmed down.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Boston Mountain Real Estate, we're experts at recognizing value trends in Fayetteville, Washington 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 most often do away with the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: