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. Since the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Different from a piggyback loan where the lender consumes all the damages, PMI is profitable 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 can buyers prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
Since it can take many years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things settled down.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're experts at determining value trends in Columbia, Howard County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. 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: