Meyer Lane Appraisals can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is generally only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changes on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the value of the home is less than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they acquire 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 can homeowners refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little earlier.
It can take many years to reach the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things cooled off.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Meyer Lane Appraisals, we're masters at identifying value trends in Hatboro, Montgomery County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At which 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: