Columbus Appraisal Company, LLC can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower defaults.
Lenders were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender in case a borrower defaults on the loan and the value of the property is less than the balance of the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they collect 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 keep from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook beforehand. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
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 tough thing to know. It is an appraiser's job to know the market dynamics of their area. At Columbus Appraisal Company, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Westerville, Franklin County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: