Integrated Assets can help you remove your Private Mortgage Insurance
It's widely inferred that a 20% down payment is the standard when purchasing a home. Since the liability for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy guards the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they collect the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Integrated Assets, we're experts at analyzing value trends in Memphis, Shelby County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: