A. M. Appraisals can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is accepted when purchasing a home. The lender's risk is often only the difference between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender if a borrower defaults on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they acquire the money, and they get paid 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 can a home buyer prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify plummeting home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things calmed down.
The toughest thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At A. M. Appraisals, we're experts at determining value trends in West Columbia, Lexington County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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