MANDERFIELD APPRAISAL GROUP can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is the standard when getting a mortgage. Considering the risk for the lender is oftentimes only the remainder 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 variationsin the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking 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. PMI protects the lender in case a borrower defaults on the loan and the worth of the house is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they get the money 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 homebuyer prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook ahead of time. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Considering it can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, 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 dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At MANDERFIELD APPRAISAL GROUP, we're masters at recognizing value trends in Alexandria, Alexandria City 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 cancel the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: