Jakway Appraisals can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser defaults.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they collect the money, and they get the money 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 can home buyers prevent 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 original loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little earlier.
Because it can take many years to arrive at the point where the principal is just 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners 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 keep up with the market dynamics of our area. At Jakway Appraisals, we're experts at determining value trends in Chittenango, Madison County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. 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: