Anderson Appraisal, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. The lender's risk is usually only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower defaults on the loan and the market price of the home is less than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's money-making for the lender because they secure the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends forecast declining home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things calmed down.
The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Anderson Appraisal, LLC, we know when property values have risen or declined. We're experts at pinpointing value trends in Amarillo, Randall County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: