Columbus Appraisal Company, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. Considering the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.
Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they secure the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends signify plunging home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things simmered down.
The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Columbus Appraisal Company, LLC, we're masters at pinpointing value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. 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: