R.M. Conrad & Associates, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is generally only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen home owners can get off the hook a little earlier. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the original loan amount, it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast plunging home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At R.M. Conrad & Associates, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in West Chester, Chester County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: