Herrin Appraisal Company can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Since the risk for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variationson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they secure the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
Considering it can take many years to reach the point where the principal is only 20% of the initial loan amount, it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends hint at declining home values, you should understand that real estate is local.
The difficult thing for most home owners to know 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 Herrin Appraisal Company, we know when property values have risen or declined. We're masters at determining value trends in Clemmons, Forsyth County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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