Appraisals by Tom can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower defaults. Banks were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they collect the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender consumes all the losses. 
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How homeowners can keep from bearing the expense of PMIThe Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook ahead of time. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. Considering it can take many years to reach the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends indicate plunging home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things simmered down. The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisals by Tom, we're masters at recognizing value trends in Fredericksburg, Orange County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
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