Baker Appraisal Services, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. The lender's risk is generally only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser doesn't pay.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, different from 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 avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the 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 ahead of time.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things simmered down.
The difficult thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Baker Appraisal Services, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Camden, Kent County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that 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: