Quinsigamond Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. The lender's liability is generally only the difference between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it became customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower is unable to pay on the loan and the worth of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they collect the money, and they get paid 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 homebuyers can avoid bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy home owners can get off the hook a little early. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners 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 keep up with the market dynamics of our area. At Quinsigamond Appraisal Services, we're experts at pinpointing value trends in Worcester, Worcester County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: