Have equity in your home? Want a lower payment? An appraisal from Appraisal First, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when purchasing a home. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower is unable to pay.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they obtain the money, and they get the money if the borrower defaults, opposite from 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 can homebuyers keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little early.
Because it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict declining home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal First, Inc., we're masters at recognizing value trends in Springfield, Greene County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. 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: