LHC Appraisals can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is common when purchasing a home. The lender's liability is generally only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value changes in the event a borrower defaults.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower is unable to pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they collect the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little earlier. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take many years to get to the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends signify declining home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At LHC Appraisals, we're masters at identifying value trends in Denton, Denton County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which 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: