Have equity in your home? Want a lower payment? An appraisal from AC Realty & Appraisals can help you get rid of your PMI.
It's widely known that a 20% down payment is accepted when purchasing a home. Because the risk for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is less 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 compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different 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 home owners keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute home owners can get off the hook a little early. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things settled down.
An accredited, 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. As appraisers, it's our job to recognize the market dynamics of our area. At AC Realty & Appraisals, we're masters at determining value trends in Winter, Sawyer County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often drop the PMI with little effort. 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: