Crescent Appraisal Group, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when buying a house. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and regular value changes in the event a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the worth of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they secure the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends hint at declining 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. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Metairie, Jefferson County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: