Hill Appraisal Associates, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. Because the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value variationson the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower is unable to pay on the loan and the worth of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Opposite from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they obtain 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 can a home owner keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook a little early.
It can take countless 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 increased in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Hill Appraisal Associates, LLC, we're masters at recognizing value trends in Philadelphia, Montgomery County, Bucks County, Delaware County and surrounding areas, and we know when property values have risen or declined. When faced with increased equity information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: