Appraisal Advisors Group can help you remove your Private Mortgage Insurance
It's widely inferred that a 20% down payment is the standard when getting a mortgage. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan.
PMI is 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 many times isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they collect 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 refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook a little early. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Since it can take many years to arrive at the point where the principal is just 20% of the initial loan amount, it's necessary to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards dismissing 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 adopting the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends predict falling home values, you should understand that real estate is local.
The hardest thing for many home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Appraisal Advisors Group, we know when property values have risen or declined. We're experts at recognizing value trends in Caguas, Caguas County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: