Have equity in your home? Want a lower payment? An appraisal from Advanced Appraising, Ltd can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. Because the liability for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
PMI is costly to a borrower 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. It's money-making for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the cost of PMI?
With the implementation 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 initial loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.
Because it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've achieved 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? Your neighborhood may not be minding the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends indicate plunging home values, you should understand that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Advanced Appraising, Ltd, we know when property values have risen or declined. We're masters at determining value trends. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: