Appraisal Advisors Group can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variationsin the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower defaults on the loan and the market price of the home is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they acquire the money, and they receive payment 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 a homeowner avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little earlier.
Because it can take many years to arrive at the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends hint at declining home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal Advisors Group, we know when property values have risen or declined. We're experts at identifying value trends in Caguas, Caguas County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually remove the PMI with little trouble. At that 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: