Verschelden Appraisals can help you remove your Private Mortgage InsuranceIt's generally known that a 20% down payment is common when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay. The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan. Because 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 pricey to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they acquire the money, and they get the money 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 owners can refrain from paying PMIThe Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop 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 a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. It can take many years to get to the point where the principal is only 20% of the original loan amount, so 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 what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things settled down. The hardest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Verschelden Appraisals, we're experts at analyzing value trends in Modesto, Stanislaus County and surrounding areas, and we know when property values have risen or declined. 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: |