Milwaukee Appraisal Co./Stowe Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. Since the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value variationsin the event a borrower is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the home is lower than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they secure the money, and they get paid 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 home buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little earlier.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things settled down.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Milwaukee Appraisal Co./Stowe Appraisals, we're experts at determining value trends in Franklin, Milwaukee County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that 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: