Barnstable/Plymouth Appraisal Services can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is often only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations in the event a borrower defaults.
The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy guards the lender if a borrower defaults on the loan and the market price of the property is lower 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 frequently isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower defaults, 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 a homebuyer prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little early. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take countless years to get to the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things simmered down.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Barnstable/Plymouth Appraisal Services, we know when property values have risen or declined. We're masters at analyzing value trends in Buzzards Bay, Barnstable County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate 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: