G and R Appraisal Service can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower is unable to pay on the loan and the worth of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
The difficult thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At G and R Appraisal Service, we know when property values have risen or declined. We're masters at identifying value trends in El Paso, El Paso County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: