Barrett & Company can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. The lender's risk is oftentimes 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 natural value variations in the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower defaults on the loan and the market price of the house is less than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.
It can take many years to get to the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Barrett & Company, we know when property values have risen or declined. We're experts at recognizing value trends in Roswell, Chaves County and surrounding areas. Faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: