The August Group Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. The lender's liability is oftentimes only 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, reselling the home, and regular value variations in the event a borrower doesn't pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy home owners can get off the hook a little early. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's essential to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
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. It is an appraiser's job to recognize the market dynamics of their area. At The August Group Inc., we're experts at identifying value trends in St Louis, Saint Louis County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the homeowner 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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