Country Manor can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. Since the liability for the lender is often only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value changeson the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan guards the lender in the event 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 because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. It's money-making for the lender because they secure the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute 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 dropped when the principal amount reaches only 80 percent.
Since it can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing 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 could have acquired equity before things cooled off, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Country Manor, we know when property values have risen or declined. We're masters at recognizing value trends in Medina, Medina County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: