Pierce Appraisal can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. Since the risk for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value changeson the chance that a purchaser defaults.
Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan protects the lender in case a borrower defaults on the loan and the worth of the house is lower than the balance of the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they obtain the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook sooner than expected.
Because it can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify plunging home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things simmered down.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Pierce Appraisal, we're experts at recognizing value trends in Gering, Scotts Bluff County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. 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: