CK Appraisals can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is typically the standard. Since the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations in the event a purchaser defaults.The market was accepting down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the property is less than the balance of the loan. PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the damages, PMI is profitable for the lender because they secure the money, and they are covered if the borrower defaults.
How can a homebuyer refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, smart home owners can get off the hook ahead of time.Since it can take a significant number of years to reach the point where the principal is only 80% of the original amount of the loan, it's essential to know how your Massachusetts home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have secured equity before the economy declined. So even when nationwide trends indicate declining home values, you should understand that real estate is local. The toughest thing for most consumers to determine is whether their home equity has exceeded the 20% point. An accredited, Massachusetts licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At CK Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Milford, Worcester County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
|
||||||||||||||||||
