REID E. CHOATE & ASSOCIATES, LLC can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Since the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value changeson the chance that a purchaser doesn't pay.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy takes care of the lender in case a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender takes in all the damages, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook sooner than expected. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals only 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 important to know how your home has grown in value. After all, any appreciation you've achieved over the years 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 hint at plummeting home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home could have gained equity before things cooled off.
The hardest thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At REID E. CHOATE & ASSOCIATES, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Pahoa, Hawaii County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: