Mark Schofield Appraisal Services can help you remove your Private Mortgage Insurance
It's largely known that a 20% down payment is common when purchasing a home. The lender's risk is generally only the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they acquire 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 homebuyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook sooner than expected. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things settled down.
A certified, 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 know the market dynamics of their area. At Mark Schofield Appraisal Services , we're masters at recognizing value trends in St Johns, Saint Johns County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate 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: