LHC Appraisals can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value variationsin the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they secure the money, and they get paid 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 a home owner keep from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook sooner than expected.
Since it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've acquired 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? Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At LHC Appraisals, we know when property values have risen or declined. We're experts at determining value trends in Denton, Denton County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: