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 usually the standard. Because the liability for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value variationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan protects the lender in case a borrower doesn't pay on the loan and the market price of the property is lower than what is owed on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take countless years to get to the point where the principal is just 20% of the initial loan amount, it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends signify plummeting home values, you should realize that real estate is local.
The hardest thing for almost all homeowners to understand 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 know the market dynamics of our area. At Appraisal House, Inc., we're masters at recognizing value trends in Destin, Okaloosa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: