Mahoney Appraisal Services, Inc can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when purchasing a home. Since the risk for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser doesn't pay.
Banks were taking down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event 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.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they collect the money, and they get the money if the borrower doesn't pay.
How can home owners prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take many years to get to the point where the principal is only 80% of the original loan amount, it's important to know how your Arkansas home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home could have secured equity before the economy declined. So even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
The toughest thing for most people to determine is just when their home's equity rises above the 20% point. A certified, Arkansas licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At Mahoney Appraisal Services, Inc, we know when property values have risen or declined. We're masters at analyzing value trends in Hot Springs National Park, Hot Spring County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that 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: