KEY INSIGHT can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is common when buying a house. The lender's risk is generally only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
PMI can be costly 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. Opposite from a piggyback loan where the lender consumes all the damages, PMI is money-making for the lender because they obtain 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 homebuyers can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have gained equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At KEY INSIGHT, we know when property values have risen or declined. We're masters at pinpointing value trends in Rhinelander, Oneida County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: