Certified Appraisal Group. LLC can help you remove your Private Mortgage InsuranceIt's typically understood that a 20% down payment is common when getting a mortgage. The lender's only exposure is typically just the difference between the home value and the balance remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser is unable to pay.
The market was working with down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the damages.
How can homebuyers keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate 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 home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
Considering 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 Ohio home has appreciated in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict lower overall home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things declined.
The hardest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Ohio licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Certified Appraisal Group. LLC, we're masters at identifying value trends in Canton, Stark County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year