Southern Minnesota Appraisal Services can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is accepted when getting a mortgage. Considering the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value changesin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what is owed 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 payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they acquire the money, and they get the money 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 can a home owner prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook a little early.
Since it can take many years to arrive at the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have gained equity before things settled down.
A certified, licensed real estate appraiser can help home owners 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 Southern Minnesota Appraisal Services, we know when property values have risen or declined. We're masters at recognizing value trends in Blue Earth, Faribault County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: