Las Vegas Appraisal Service, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser doesn't pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental plan covers the lender if a borrower defaults on the loan and the market price of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they collect the money, and they get paid if the borrower is unable to 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 required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's essential to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things cooled off.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Las Vegas Appraisal Service, Inc., we're experts at pinpointing value trends in Las Vegas, Clark County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which 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: