Daniel Todd Appraisal Services, LLC can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is the standard when getting a mortgage. The lender's liability is usually only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value variations on the chance that a purchaser defaults.
During the recent mortgage upturn 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 added risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. It's profitable for the lender because they collect the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy home owners can get off the hook sooner than expected. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's crucial 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 should you pay 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 could have gained equity before things cooled off, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Daniel Todd Appraisal Services, LLC, we know when property values have risen or declined. We're masters at recognizing value trends in Bloomington, Monroe County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which 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: