Weaver Appraisal Group can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Considering the risk for the lender is often only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes 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 is pricey to a borrower. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender consumes 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 homebuyers avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired 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 hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Weaver Appraisal Group, we know when property values have risen or declined. We're masters at identifying value trends in Butner, Granville County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: