KEY INSIGHT can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuations 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 last decade. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from bearing the cost of PMI?
With the utilization 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. Keen homeowners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to get to the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At KEY INSIGHT, we're experts at analyzing value trends in Rhinelander, Oneida County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: