Drach Appraisals can help you remove your Private Mortgage Insurance
It's largely known that a 20% down payment is the standard when buying a house. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower defaults.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they collect the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast plummeting home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Drach Appraisals, we're masters at pinpointing value trends in North Wales, Montgomery County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: