Diversified Appraisal can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. Because the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value variations on the chance that a purchaser defaults.
Banks were taking down payments discounted to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they collect the money, and they are covered if the borrower defaults, different from a piggyback loan where the lender absorbs all the damages.
How homebuyers can avoid bearing the cost of PMIAs a result of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. Acute home owners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Because it can take several years to reach the point where the principal is just 80% of the original loan amount, it's essential to know how your Pennsylvania home has increased in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home could have acquired equity before things cooled off.
The toughest thing for almost all homeowners to determine is just when their home's equity goes over the 20% point. An accredited, Pennsylvania licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Diversified Appraisal, we know when property values have risen or declined. We're experts at identifying value trends in Huntingdon, Mifflin County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually cancel 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: