Aaliyah Appraisals can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is accepted when purchasing a home. Since the risk for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value fluctuationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees 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 sooner than expected.
It can take many years to get to the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things cooled off.
The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Aaliyah Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Littleton, Jefferson County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: