The Welter Appraisal Group can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when buying a house. The lender's liability is generally only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value variations in the event a borrower defaults.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner keep from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends hint at 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 goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At The Welter Appraisal Group, we know when property values have risen or declined. We're masters at determining value trends in Oakhurst, Monmouth County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which 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: