The August Group Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. The lender's liability is often only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower defaults on the loan and the worth of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can prevent paying PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take many years to reach the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At The August Group Inc., we know when property values have risen or declined. We're experts at determining value trends in St Louis, Saint Louis County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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