Let Associated Appraisal Group, Inc. help you figure out if you can get rid of your PMI
It's largely known that a 20% down payment is the standard when buying a house. The lender's liability is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy homeowners can get off the hook beforehand. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original loan amount, so it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners 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 keep up with the market dynamics of our area. At Associated Appraisal Group, Inc., we're experts at identifying value trends in Palm Harbor, Henderson County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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