The August Group Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a purchaser defaults.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy guards the lender in the event a borrower defaults on the loan and the market price of the property is lower than what the borrower still owes on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise home owners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home may have acquired equity before things simmered down.
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 difficult thing to know. As appraisers, it's our job to recognize 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 data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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