Meyer Lane Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value variations on the chance that a purchaser defaults.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid paying PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook sooner than expected.
Considering it can take many years to reach the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Meyer Lane Appraisals, we're masters at determining value trends in Hatboro, Montgomery County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: