Anderson Appraisal, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. Considering the liability for the lender is generally only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value changeson the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's money-making for the lender because they collect the money, and they get the money if the borrower doesn't pay, contradictory to 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 home owners can refrain from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little early.
It can take many years to get to the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to know the market dynamics of their area. At Anderson Appraisal, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Amarillo, Randall County and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: