Baker Appraisal Services, Inc. can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Considering the risk for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value changeson the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in case a borrower defaults on the loan and the worth of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they secure the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little early.
It can take many years to reach the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time 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 following the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends predict falling home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Baker Appraisal Services, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Camden, Kent County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that 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: