MICHAEL J. CALL APPRAISAL SERVICE can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. Since the risk for the lender is usually only the difference 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 natural value variationsin the event a borrower is unable to pay.
The market was taking 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 added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers 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 can be expensive 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. Different from a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they obtain the money, and they receive payment 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 homebuyers keep from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends signify plummeting home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At MICHAEL J. CALL APPRAISAL SERVICE, we know when property values have risen or declined. We're masters at recognizing value trends in Springfield, Sangamon County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often 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: