Perry & Associates Appraisal Company can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when getting a mortgage. Since the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value changesin the event a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can keep from bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart home owners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends predict 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 keep up with the market dynamics of their area. At Perry & Associates Appraisal Company, we're experts at determining value trends in Indianapolis, Marion County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often do away with 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: