Teton Appraisals & Consulting, Inc. can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when buying a house. Because the liability for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value changes on the chance that a borrower is unable to pay.
Lenders were accepting down payments as low as 10, 5 and frequently 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they collect the money, and they are covered if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the costs.
How can buyers prevent paying PMI?The Homeowners Protection Act of 1998 requires 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 states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart homeowners can get off the hook ahead of time.
It can take several years to reach the point where the principal is only 80% of the original loan amount, so it's important to know how your Wyoming home has appreciated in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home might have acquired equity before things cooled off. So even when nationwide trends hint at a reduction in home values, you should know most importantly that real estate is local.
A certified, Wyoming licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Teton Appraisals & Consulting, Inc., we're masters at identifying value trends in Jackson, Teton County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: