South Shore Appraisals can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is accepted when getting a mortgage. The lender's liability is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.
During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan covers the lender if a borrower is unable to pay on the loan and the worth of the house is less than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer 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 beginning loan amount. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute homeowners can get off the hook sooner than expected.
Since it can take many years to get to the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At South Shore Appraisals, we know when property values have risen or declined. We're masters at identifying value trends in Schererville, Lake County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: