Area Appraisal Services, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. Considering the liability for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower is unable to pay on the loan and the market price of the house is less than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can refrain from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things cooled off.
The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Area Appraisal Services, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Bethesda, Montgomery County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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