Atlantic Coast Appraisers & Associates, Inc. can help you remove your Private Mortgage InsuranceIt's widely known that a 20% down payment is accepted when purchasing a home. Considering the risk for the lender is oftentimes only the difference 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 regular value variations in the event a purchaser defaults.
Lenders were taking down payments dropping to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they are covered if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the losses.
How can buyers avoid bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on nearly all loans. Keen home owners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to reach the point where the principal is only 80% of the original loan amount, so it's important to know how your North Carolina home has increased in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things cooled off.
A certified, North Carolina licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Atlantic Coast Appraisers & Associates, Inc., we're masters at determining value trends in Wilmington, New Hanover County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At which time, the homeowner can retain 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