South Shore Appraisals can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is accepted when getting a mortgage. The lender's risk is generally only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value changes in the event a purchaser doesn't pay.
Banks were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook sooner than expected. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original loan amount, so it's important to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends hint at plummeting 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 tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At South Shore Appraisals, we're masters at recognizing value trends in Schererville, Lake County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: