Horizon Appraisal Services, LLC can help you remove your Private Mortgage Insurance
It's typically known that a 20% down payment is accepted when buying a house. 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 charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower doesn't pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan guards the lender in case a borrower defaults on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's profitable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's crucial 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 dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
The toughest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Horizon Appraisal Services, LLC, we're experts at analyzing value trends in Williston, Williams County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: