Collateral Risk Associates LLC can help you remove your Private Mortgage Insurance
It's typically known that a 20% down payment is the standard when purchasing a home. The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower 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 sometimes 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower defaults on the loan and the market price of the house is less than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's profitable for the lender because they secure the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little early.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends signify declining home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things simmered down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Collateral Risk Associates LLC, we're masters at analyzing value trends in Lenexa, Leavenworth County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that 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: