Anderson Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. Since the liability for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value changeson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen home owners can get off the hook sooner than expected. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Anderson Appraisals, we're masters at analyzing value trends in Coeur D Alene, Kootenai County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that 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: