Moore Appraising can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when buying a house. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
The market was working with down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan covers the lender in the event a borrower defaults on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Instead of a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they secure the money, and they get paid if the borrower doesn't pay.
How homebuyers can keep from bearing the expense of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on most loans. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen homeowners can get off the hook ahead of time.
Considering it can take many years to get to the point where the principal is only 80% of the initial loan amount, it's crucial to know how your Montana home has grown in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things cooled off.
The toughest thing for most consumers to figure out is whether their home equity has exceeded the 20% point. A certified, Montana licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Moore Appraising, we know when property values have risen or declined. We're masters at pinpointing value trends in Polson, Lake County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: