Avalon Park Inc. Residential Appraisal Division can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is common when purchasing a home. Since the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuationsin the event a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they collect the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook sooner than expected.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify plummeting 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 goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Avalon Park Inc. Residential Appraisal Division, we're experts at analyzing value trends in Milton, Santa Rosa County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At that 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: