Butler Appraisals can help you remove your Private Mortgage Insurance
It's largely understood that a 20% down payment is accepted when getting a mortgage. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value variations on the chance that a borrower doesn't pay.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender if a borrower is unable to pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they collect the money, and they get paid 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 home owners can prevent bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, any appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
The difficult thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Butler Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Perry, Dallas County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: