Barnes Appraisal Company can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when getting a mortgage. Considering the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changesin the event a borrower is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in case a borrower defaults on the loan and the worth of the property is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender consumes all the losses, PMI is profitable for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can avoid bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise home owners can get off the hook a little early.
Because it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends indicate 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 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 Barnes Appraisal Company, we know when property values have risen or declined. We're masters at analyzing value trends in Lawton, Comanche County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that 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: