Tucker Appraisal Services 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 remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they secure the money, and they receive payment 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 home buyers can prevent bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends indicate declining home values, you should understand 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 surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Tucker Appraisal Services, we know when property values have risen or declined. We're masters at determining value trends in Raleigh, Wake County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which 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: