Have equity in your home? Want a lower payment? An appraisal from Priority Appraisals can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is often only the difference between the home value and the sum due on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth 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 oftentimes isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they secure the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent paying PMI
With the utilization 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 equals 78 percent of the beginning loan amount. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has appreciated 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, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things simmered down.
The difficult 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 definitely help. As appraisers, it's our job to know the market dynamics of our area. At Priority Appraisals, we're experts at pinpointing value trends in Trinity, Morgan County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: