Appraisals Plus can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. Because the risk for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value changesin the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they acquire the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner keep 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 equals 78 percent of the initial loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, keen homeowners can get off the hook ahead of time.
Since it can take many years to reach the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things cooled off.
The difficult thing for many home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Appraisals Plus, we know when property values have risen or declined. We're masters at analyzing value trends in Philadelphia, Philadelphia County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. 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: