Acme Appraisals LLC can help you remove your Private Mortgage InsuranceIt's largely understood that a 20% down payment is common when getting a mortgage. Because the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser doesn't pay.
The market was taking down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. It's advantageous for the lender because they secure the money, and they get the money if the borrower is unable to pay, in contrast to a piggyback loan where the lender absorbs all the losses.
How home buyers can avoid bearing the expense of PMIAs a result of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on most loans. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook sooner than expected.
It can take a significant number of years to arrive at the point where the principal is just 80% of the original amount of the loan, so it's crucial to know how your Mississippi home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate lower overall home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things declined.
An accredited, Mississippi licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Acme Appraisals LLC, we're masters at pinpointing value trends in Olive Branch, Desoto County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: