Golden Rule Appraisals can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's risk is usually only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the house is less than the balance of the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they obtain the money, and they get the money if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little early.
Considering it can take many years to reach the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
The toughest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Golden Rule Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Edmond, Oklahoma County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At which 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: