Liberty Appraisal Group, Inc. can help you remove your Private Mortgage InsuranceIt's generally known that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value variations on the chance that a purchaser doesn't pay.
The market was accepting down payments dropping to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Instead of a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they acquire the money, and they are covered if the borrower is unable to pay.
How homebuyers can refrain from bearing the cost of PMIThe Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take several years to arrive at the point where the principal is just 80% of the initial amount borrowed, so it's important to know how your Utah home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not follow national trends and/or your home may have gained equity before the economy declined. So even when nationwide trends signify a reduction in home values, you should understand that real estate is local.
The hardest thing for most consumers to determine is whether their home equity has exceeded the 20% point. An accredited, Utah licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Liberty Appraisal Group, Inc., we're experts at identifying value trends in Sandy, Salt Lake County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little effort. 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: