Country Manor can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is oftentimes only the difference 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 regular value changeson the chance that a purchaser is unable to pay.
Lenders were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they collect the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little early.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things calmed down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
The hardest thing for almost all homeowners to know 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 know the market dynamics of our area. At Country Manor, we're masters at determining value trends in Medina, Medina County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little effort. At which 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: