At Harbor Appraisals, we can help you remove your Private Mortgage Insurance!When buying a house, a 20% down payment is typically the standard. The lender's only exposure is generally just the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations in the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the market price of the home is less than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
Want to know how you can remove the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. Wise home owners can get off the hook ahead of time. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to get to the point where the principal is just 80% of the original loan amount, it's essential to know how your Minnesota home has grown in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home could have acquired equity before things simmered down. So even when nationwide trends signify a reduction in home values, you should realize that real estate is local.
The toughest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Minnesota licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Harbor Appraisals, we're experts at pinpointing value trends in Duluth, Saint Louis County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.