Sloan Real Estate Solutions can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is common when buying a house. Considering the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value changesin the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they collect the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender takes in all the costs.
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 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy home owners can get off the hook ahead of time. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Sloan Real Estate Solutions, we know when property values have risen or declined. We're experts at analyzing value trends in Walland, Blount County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: