Area Appraisal Services, Inc. can help you remove your Private Mortgage Insurance
It's largely inferred that a 20% down payment is the standard when buying a house. The lender's liability is often only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value changes in the event a borrower defaults.
The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower defaults on the loan and the market price of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they collect the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender consumes 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 home owners prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy home owners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends predict declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Area Appraisal Services, Inc., we're masters at pinpointing 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 drop the PMI with little anxiety. At which 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:
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