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 often only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower doesn't pay.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the worth of the house is less than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to get to the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize 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 information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: