Crescent Appraisal Group, Inc. can help you remove your Private Mortgage Insurance
It's largely inferred that a 20% down payment is the standard when getting a mortgage. The lender's liability is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower is unable to pay.
Banks were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the losses.
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 bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy home owners can get off the hook a little earlier. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Crescent Appraisal Group, Inc., we're masters at analyzing value trends in Metairie, Jefferson 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 generally drop the PMI with little anxiety. At which 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: