Barnes Appraisal Company can help you remove your Private Mortgage Insurance
It's largely understood that a 20% down payment is accepted when buying a house. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value variations in the event a borrower defaults.
Banks were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender absorbs all the losses, PMI is profitable for the lender because they acquire 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 home buyers can prevent bearing the expense 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 reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook ahead of time.
It can take many years to reach the point where the principal is only 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 obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things settled down.
The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Barnes Appraisal Company, we know when property values have risen or declined. We're experts at identifying value trends in Lawton, Comanche County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often drop 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: