Have equity in your home? Want a lower payment? An appraisal from Associated Appraisal Group, Inc. can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. The lender's liability is usually only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
PMI is 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. Opposite from a piggyback loan where the lender consumes all the losses, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little earlier.
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 crucial to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends indicate declining home values, you should understand that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Associated Appraisal Group, Inc., we're experts at pinpointing value trends in Palm Harbor, Henderson County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often drop the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.