Mountain View Appraisal can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when purchasing a home. Considering the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the deficits.
How can buyers refrain from paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy home owners can get off the hook ahead of time. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Since it can take a significant number of years to get to the point where the principal is just 80% of the original amount borrowed, it's essential to know how your Montana home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things simmered down.
The difficult thing for most homeowners to determine is just when their home's equity rises above the 20% point. An accredited, Montana licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Mountain View Appraisal, we're masters at analyzing value trends in Ennis, Madison County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little trouble. 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: