Area Appraisal Services, Inc. can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's risk is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser is unable to pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower defaults on the loan and the value of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can keep from bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook sooner than expected.
Since 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 gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
The toughest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Area Appraisal Services, Inc., we're experts at recognizing value trends in Bethesda, Montgomery County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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