3C Appraisals, Inc. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. The lender's risk is often only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value variations in the event a borrower defaults.During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower defaults on the loan and the market price of the house is lower than the balance of the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Instead of a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
How can a home buyer refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, smart home owners can get off the hook ahead of time.It can take several years to arrive at the point where the principal is just 80% of the original amount borrowed, so it's essential to know how your Utah home has grown in value. After all, any appreciation you've gained over time counts towards abolishing 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 gained equity before the economy cooled off. So even when nationwide trends hint at a reduction in home values, you should realize that real estate is local. The hardest thing for almost all people to determine is just when their home's equity rises above the 20% point. An accredited, Utah licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At 3C Appraisals, Inc., we're masters at identifying value trends in Washington, Washington 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 most often eliminate 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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