Medina Appraisal Company can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value changesin the event a borrower doesn't pay.
Lenders were taking down payments as low as 10, 5 and even 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. PMI takes care of the lender if a borrower doesn't pay on the loan and the worth of the property is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's money-making for the lender because they collect the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate 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 abandoned when the principal amount equals only 80 percent. So, smart homeowners can get off the hook sooner than expected.
Considering it can take countless years to get to the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify decreasing home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above 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 Medina Appraisal Company, we're masters at pinpointing 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 drop the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: