Premiere Appraisals, LLC can help you remove your Private Mortgage Insurance
It's widely understood that a 20% down payment is accepted when purchasing a home. Since the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationsin the event a borrower defaults.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they obtain 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 can buyers avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved 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? Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends indicate declining home values, you should understand that real estate is local.
The hardest thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At Premiere Appraisals, LLC, we know when property values have risen or declined. We're experts at pinpointing value trends in Carlsbad, Eddy County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: