Morley & McConkie can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is typically the standard. The lender's risk is often only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variations on the chance that a borrower doesn't pay.During the recent mortgage boom of the mid 2000s, it was customary to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower doesn't pay on the loan and the value of the house is lower than the loan balance. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
How buyers can prevent paying PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on most loans. Keen home owners can get off the hook a little earlier. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.It can take several years to reach the point where the principal is only 80% of the initial amount borrowed, so it's important to know how your Utah home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things simmered down. The hardest thing for almost all consumers to determine is just when their home's equity rises above the 20% point. An accredited, Utah licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Morley & McConkie, we know when property values have risen or declined. We're masters at analyzing value trends in Saint George, Washington County, and surrounding areas. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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