Columbus Appraisal Company, LLC can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is accepted when buying a house. Since the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value changeson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower is unable to pay on the loan and the value of the house is lower than the loan balance.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower defaults.
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 paying PMI?
With the implementation 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 reaches 78 percent of the original loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy home owners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things cooled off.
The difficult thing for almost all home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Columbus Appraisal Company, LLC, we're masters at recognizing value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: