Home and Hearth Appraisals LLC can help you remove your Private Mortgage Insurance
It's widely understood that a 20% down payment is the standard when purchasing a home. The lender's risk is generally only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value variations on the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they secure 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 buyers refrain from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook a little early. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to get to the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things settled down.
The hardest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Home and Hearth Appraisals LLC, we're masters at pinpointing value trends in Langhorne, Bucks County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally 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: