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 known that a 20% down payment is accepted when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes in the event a borrower doesn't pay.
Banks were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than what is owed on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. It's profitable for the lender because they collect the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer prevent paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
A certified, 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. It's 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. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that 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: