Area Appraisal Services, Inc. can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is the standard when buying a house. The lender's risk is often only the difference between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value variations on the chance that a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid paying 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 equals 78 percent of the original loan amount. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little earlier.
Considering it can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things calmed down.
The difficult 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 certainly help. As appraisers, it's our job to know the market dynamics of our area. At Area Appraisal Services, Inc., we're experts at analyzing value trends in Bethesda, Montgomery 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 most often drop the PMI with little trouble. 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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