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 buying a house. Since the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value changesin the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender if a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they obtain the money, and they get the money if the borrower is unable to pay, unlike 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 home buyers can keep from bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise home owners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Appraisal First, Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Springfield, Greene County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that 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: