Race Appraisal Services, LLC can help you remove your Private Mortgage Insurance
It's widely understood that a 20% down payment is common when buying a house. Since the risk for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy guards the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from bearing the expense of 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 initial loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little earlier.
Because it can take many years to get to the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
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 recognize the market dynamics of our area. At Race Appraisal Services, LLC, we're masters at determining value trends in East Longmeadow, Hampden County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate 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:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.