Medina Appraisal Company (330) 220-1700 can help you remove your Private Mortgage Insurance
It's widely inferred that a 20% down payment is common when buying a house. Since the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower defaults.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's beneficial for the lender because they collect the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute home owners can get off the hook ahead of time.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've obtained 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? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things simmered down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Medina Appraisal Company (330) 220-1700, we're masters at recognizing value trends in Brunswick, Medina County and surrounding areas, and we know when property values have risen or declined. 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: