Furr Appraisal Service can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender if a borrower defaults on the loan and the worth of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower doesn't pay, contradictory to 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 can a buyer keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen homeowners can get off the hook a little earlier. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
Considering it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate plunging home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Furr Appraisal Service, we know when property values have risen or declined. We're masters at identifying value trends in Camden, Benton County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little effort. At which 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: