Anderson Appraisals can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's risk is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan guards the lender in case a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they collect the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook ahead of time. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Anderson Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Coeur D Alene, Kootenai County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that 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: