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 typically the standard. The lender's liability is often only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy takes care of the lender in case a borrower defaults on the loan and the value of the home is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay, contradictory to 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 homebuyer 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 equals 78 percent of the beginning loan amount. Keen home owners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends forecast decreasing home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have secured equity before things calmed down.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At AC Realty & Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Winter, Sawyer County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: