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 typically inferred that a 20% down payment is common when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuationson the chance that a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy protects the lender in case a borrower defaults on the loan and the worth of the property is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they acquire the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends hint at plunging home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things cooled off.
The hardest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Astute Appraisals, Inc., we're experts at pinpointing value trends in Columbia, Howard County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: