Anderson Appraisal, LLC can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. The lender's risk is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is less than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. It's advantageous for the lender because they secure the money, and they get the money 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 home owners avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart home owners can get off the hook sooner than expected.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could 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 difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Anderson Appraisal, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Amarillo, Randall County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. At which 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: