Quinsigamond Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when getting a mortgage. Since the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value variationson the chance that a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy guards the lender in the event a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the deficits.
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 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
Because it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends signify decreasing 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 difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Quinsigamond Appraisal Services, we know when property values have risen or declined. We're experts at analyzing value trends in Worcester, Worcester County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. 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: