KEY INSIGHT can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations in the event a borrower is unable to pay.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the worth of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they collect the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners prevent paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook a little early. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends hint at decreasing 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 rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At KEY INSIGHT, we know when property values have risen or declined. We're masters at recognizing value trends in Rhinelander, Oneida County and surrounding areas. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: