Nagle Appraisal LLC can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference 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 typical value changes in the event a borrower is unable to pay.
During the recent mortgage upturn that our country recently experienced, it became customary to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible. As opposed to a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay.
How can a home buyer prevent bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on most loans. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take many years to reach the point where the principal is only 80% of the initial amount of the loan, so it's essential to know how your Ohio home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things simmered down.
An accredited, Ohio licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Nagle Appraisal LLC, we're masters at recognizing value trends in Dayton, Montgomery County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often cancel 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year