Have equity in your home? Want a lower payment? An appraisal from Astute Appraisals, Inc. can help you get rid of your PMI.
It's generally known that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value changesin the event a borrower doesn't pay.
Banks were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they obtain the money, and they get paid 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 home buyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take countless years to reach the point where the principal is only 20% of the original loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Astute Appraisals, Inc., we're experts at identifying value trends in Columbia, Howard County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: