Quast Appraisal Services can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is the standard when purchasing a home. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower defaults.
Lenders were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender in case a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook sooner than expected. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has increased in value. After all, all of the appreciation you've accomplished 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% mark? Despite the fact that nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Quast Appraisal Services, we're experts at pinpointing value trends in Hot Springs, Garland County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually drop 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: