Have equity in your home? Want a lower payment? An appraisal from Homeowner Appraisal Services can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Considering the liability for the lender is often only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value variationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay, unlike 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 keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise homeowners can get off the hook a little earlier. The law designates that, at the 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 original amount borrowed, so it's necessary to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Homeowner Appraisal Services, we know when property values have risen or declined. We're masters at analyzing value trends in Ponte Vedra, Saint Johns County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: