C. Gaba Appraisals, LLC can help you remove your Private Mortgage InsuranceA 20% down payment is typically accepted when buying a house. The lender's only liability is often just the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a borrower doesn't pay.
Banks were working with down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower doesn't pay on the loan and the value of the home is less 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 many times isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they secure the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender absorbs all the deficits.
How homebuyers can refrain from bearing the cost of PMIThe Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook ahead of time.
It can take a significant number of years to reach the point where the principal is just 80% of the original loan amount, so it's essential to know how your Alabama home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict falling home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things cooled off.
The hardest thing for almost all people to figure out is just when their home's equity rises above the 20% point. A certified, Alabama licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At C. Gaba Appraisals, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Mobile, Mobile County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that 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: