Mark Schofield Appraisal Services can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is accepted when purchasing a home. Considering the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value changesin the event a borrower is unable to pay.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's advantageous for the lender because they collect the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender absorbs all the losses.
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 bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook beforehand. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
The difficult thing for many homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Mark Schofield Appraisal Services , we're experts at pinpointing value trends in St Johns, Saint Johns County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. At which 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: