Race Appraisal Services, LLC can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's liability is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid bearing the expense of PMI?
With the utilization 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 initial loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little earlier.
Considering it can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Race Appraisal Services, LLC, we know when property values have risen or declined. We're masters at recognizing value trends in East Longmeadow, Hampden County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.