Have equity in your home? Want a lower payment? An appraisal from AC Realty & Appraisals can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value variationsin the event a purchaser doesn't pay.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the worth of the home is less than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner refrain from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At AC Realty & Appraisals, we're experts at determining value trends in Winter, Sawyer County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually drop 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: