LHC Appraisals can help you remove your Private Mortgage Insurance
It's typically known that a 20% down payment is the standard when getting a mortgage. Considering the risk for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion 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 boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the value of the property is lower than the balance of the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they acquire the money, and they get paid 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 can buyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart home owners can get off the hook beforehand. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends signify plunging home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At LHC Appraisals, we're masters at recognizing value trends in Denton, Denton County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: