TNT Appraisal MN can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they collect the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook sooner than expected.
Since it can take countless years to arrive at the point where the principal is just 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things calmed down.
The toughest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At TNT Appraisal MN, we know when property values have risen or declined. We're experts at pinpointing value trends in Red Wing, Goodhue County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that 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: