Columbus Appraisal Company, LLC can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is accepted when getting a mortgage. Considering the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value changesin the event a borrower doesn't pay.
Banks were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they collect the money, and they get paid 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 home owners can refrain from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook a little early. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, so 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 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 declining home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things settled down.
The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Columbus Appraisal Company, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Westerville, Franklin County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: