ABS Appraisal Service, Inc. can help you remove your Private Mortgage Insurance
It's widely understood that a 20% down payment is common when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI 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.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
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 bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little earlier.
Since it can take countless years to get to the point where the principal is just 20% of the initial loan amount, it's necessary to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends predict declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At ABS Appraisal Service, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Howell, Livingston County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. 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: