O'Brist Appraisal, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. Since the risk for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value changesin the event a borrower is unable to pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the worth of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they collect the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners 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 reaches 78 percent of the beginning loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook ahead of time.
Since it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At O'Brist Appraisal, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Centralia, Marion County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove the PMI with little trouble. At that 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: