Let Astute Appraisals, Inc. help you figure out if you can eliminate your PMI
A 20% down payment is typically the standard when buying a house. Since the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value variationsin the event a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower defaults on the loan and the worth of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Opposite from a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute homeowners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Since it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Columbia, Howard County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: