The Coyle Group

 

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Phone: 215.836.5500

 

 

 

 

 

 

 

 

PMI Removal

 

The Coyle Group...Philadelphia's Appraisers, can help you remove your Private Mortgage Insurance

When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay.

During the recent mortgage upturn of the last decade, it became common to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender if a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they secure the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the deficits.

 How can a buyer keep from bearing the expense of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart homeowners can get off the hook sooner than expected. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.

It can take a significant number of years to arrive at the point where the principal is only 80% of the original amount of the loan, so it's crucial to know how your Pennsylvania home has increased in value. After all, every bit of appreciation you've acquired 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 may have secured equity before things simmered down. So even when nationwide trends forecast declining home values, you should realize that real estate is local.

A certified, Pennsylvania licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At The Coyle Group, LLC, we know when property values have risen or declined. We're experts at pinpointing value trends in Erdenheim, Montgomery County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little effort. At that 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