Appraisals Plus can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is common when getting a mortgage. The lender's liability is often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender if a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from 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 homebuyers can keep from paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little early.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends signify declining home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home could have secured equity before things simmered down.
The toughest thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Appraisals Plus, we're masters at determining value trends in Philadelphia, Philadelphia County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: