Crescent Appraisal Group, Inc. can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when purchasing a home. The lender's risk is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value changes in the event a purchaser doesn't pay.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they collect the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, keen homeowners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Metairie, Jefferson County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little trouble. 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: