The Welter Appraisal Group can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when getting a mortgage. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they obtain the money, and they get the money 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 a home buyer prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart home owners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners 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 The Welter Appraisal Group, we're experts at analyzing value trends in Oakhurst, Monmouth County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that 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: