Charles M. Gray, Appraiser can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. The lender's only risk is generally just the difference between the home value and the balance due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value changes in the event a borrower doesn't pay.
Lenders were accepting down payments discounted to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they secure the money, and they get paid if the borrower is unable to pay.
How home owners can refrain from bearing the cost of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. Acute homeowners can get off the hook ahead of time. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take a significant number of years to get to the point where the principal is only 80% of the original amount of the loan, it's necessary to know how your South Carolina home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have secured equity before things cooled off. So even when nationwide trends forecast a reduction in home values, you should understand that real estate is local.
An accredited, South Carolina licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Charles M. Gray Appraising, we're experts at analyzing value trends in Hilton Head Island, Beaufort 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 generally cancel the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: