Mark Schofield Appraisal Services can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender takes in all the damages, PMI is lucrative for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
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 bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends hint at plummeting 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 difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Mark Schofield Appraisal Services , we're masters at identifying value trends in St Johns, Saint Johns County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: