McCarthy Real Estate, Inc., Appraisal Services can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than what is owed on the loan.
PMI can be 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. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they collect the money, and they get the money 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 a home buyer refrain from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook sooner than expected. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At McCarthy Real Estate, Inc., Appraisal Services, we're experts at determining value trends in Marietta, Washington County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: