H.M. Hoffman & Company can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when buying a house. Considering the risk for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value changesin the event a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the worth of the property is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute homeowners can get off the hook a little earlier. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take countless years to get to the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things simmered down.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At H.M. Hoffman & Company, we're masters at identifying value trends in Narberth, Montgomery County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally cancel 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: