Barnstable/Plymouth Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender if a borrower is unable to pay on the loan and the worth of the property is lower than what is owed on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they collect the money, and they get paid 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 homebuyers can keep from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Barnstable/Plymouth Appraisal Services, we're experts at pinpointing value trends in Buzzards Bay, Barnstable County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often drop the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: