Button Appraisers can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value changes in the event a borrower doesn't pay.
Banks were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower defaults on the loan and the value of the property is less than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's favorable for the lender because they secure the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little earlier. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Because it can take many years to get to the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
The hardest thing for almost all 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 recognize the market dynamics of their area. At Button Appraisers, we're masters at pinpointing value trends in Saint Petersburg, Pinellas County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove 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: