Furr Appraisal Service can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. The lender's liability is usually only the remainder between the home value and the sum due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser doesn't pay.
Lenders were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they acquire the money, and they receive payment 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 buyers keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Furr Appraisal Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Camden, Benton County and surrounding areas. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: