Branam's Inc.- Real Estate can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value fluctuationson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan covers the lender in case a borrower defaults on the loan and the market price of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they acquire the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things simmered down.
The toughest thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Branam's Inc.- Real Estate, we know when property values have risen or declined. We're masters at identifying value trends in Holton, Jackson County and surrounding areas. When faced with data from an appraiser, the mortgage company will often remove the PMI with little trouble. At which 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: