Crowe Appraisals can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's liability is usually only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changes in the event a borrower defaults.
During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they obtain 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 home owner refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little earlier.
Since it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends forecast plummeting home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things settled down.
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 hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Crowe Appraisals, we're masters at pinpointing value trends in Oklahoma City, Oklahoma County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. 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: