Performance Appraisals Inc. can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when buying a house. Since the risk for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser defaults.
Lenders were working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender if a borrower defaults on the loan and the market price of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute home owners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends indicate falling 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 tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Performance Appraisals Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often remove the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: