Columbus Appraisal Company, LLC can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Since the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value variationsin the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the worth of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in 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 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 original loan amount. Smart home owners can get off the hook ahead of time. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners 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 keep up with the market dynamics of our area. At Columbus Appraisal Company, LLC, we know when property values have risen or declined. We're experts at determining value trends in Westerville, Franklin County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which 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: