Have equity in your home? Want a lower payment? An appraisal from Astute Appraisals, Inc. can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value changes on the chance that a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so 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 your loan balance has fallen below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends hint at plummeting home values, you should understand 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 hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Columbia, Howard County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: