Las Vegas Appraisal Service, Inc. can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender if a borrower is unable to pay on the loan and the worth of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they secure the money, and they get the money 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 buyers can prevent bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At Las Vegas Appraisal Service, Inc., we're experts at analyzing value trends in Las Vegas, Clark County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At which 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: