Graham Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when buying a house. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower is unable to pay.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower is unable to pay on the loan and the value of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict declining home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things settled down.
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. It's an appraiser's job to understand the market dynamics of their area. At Graham Appraisal, we know when property values have risen or declined. We're experts at recognizing value trends in Glasgow, Barren County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually eliminate 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: