Have equity in your home? Want a lower payment? An appraisal from Appraisal House, Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser is unable to pay.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can keep from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute home owners can get off the hook sooner than expected.
It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify declining home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things calmed down.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Appraisal House, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Destin, Okaloosa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that 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: