Crescent Appraisal Group, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a purchaser doesn't pay.
The market was working with 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 minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the home 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 generally isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower defaults, different 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 homebuyer avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little earlier.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're experts at determining value trends in Metairie, Jefferson County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: