Weaver Appraisal Group can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard 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% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's money-making for the lender because they collect the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid paying PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends signify declining home values, you should realize that real estate is local.
The toughest thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Weaver Appraisal Group, we're experts at pinpointing value trends in Butner, Granville County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: