Appraisals Plus can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is often only the difference between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser doesn't pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive 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 absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can avoid paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook a little early.
Considering it can take countless years to get to the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate falling home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things cooled off.
The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Appraisals Plus, we're experts at identifying value trends in Philadelphia, Philadelphia County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often remove the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: