Real Property Metrics can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is common when purchasing a home. Considering the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the value of the home is less than the balance of the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Real Property Metrics, we're masters at determining value trends in Lake Worth, Palm Beach 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 effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: