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 widely inferred that a 20% down payment is common when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value variationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This added plan guards the lender if a borrower defaults on the loan and the value of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, opposite from 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 can a buyer avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen home owners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The toughest thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Columbia, Howard County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: