Owen Appraisal Service LLC can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Since the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender if a borrower doesn't pay on the loan and the worth of the house is less than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook beforehand. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home could have secured equity before things simmered down.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Owen Appraisal Service LLC, we're experts at pinpointing value trends in Pittsburgh, Allegheny County and surrounding areas in Southwestern PA, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. 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: