MANDERFIELD APPRAISAL GROUP can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they collect the money, and they get paid 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 home owner avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little early.
Considering it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
The hardest thing for many home owners to know is just when their home's equity rises above 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 MANDERFIELD APPRAISAL GROUP, we're experts at determining value trends in Alexandria, Alexandria City County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. 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: