Milwaukee Appraisal Co./Stowe Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when getting a mortgage. Considering the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value changeson the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the market price of the home is less 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 bundled into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things calmed down.
The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Milwaukee Appraisal Co./Stowe Appraisals, we know when property values have risen or declined. We're experts at determining value trends in Franklin, Milwaukee County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: