Mark Schofield Appraisal Services can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is common when buying a house. The lender's liability is often only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser defaults.
Lenders were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they obtain the money, and they get paid 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 home owner refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook beforehand. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends forecast plunging home values, you should understand that real estate is local.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Mark Schofield Appraisal Services , we know when property values have risen or declined. We're experts at pinpointing value trends in St Johns, Saint Johns County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that 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: