Have equity in your home? Want a lower payment? An appraisal from Appraisal House, Inc. can help you get rid of your PMI.
It's generally known that a 20% down payment is accepted when buying a house. The lender's risk is usually only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser is unable to pay.
The market was working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. It's favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook a little early. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home could have acquired equity before things settled down.
The toughest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Appraisal House, Inc., we're masters at determining value trends in Destin, Okaloosa 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 most often eliminate the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: