Have equity in your home? Want a lower payment? An appraisal from Graham Appraisal can help you get rid of your PMI.
It's largely understood that a 20% down payment is accepted when getting a mortgage. Because the risk for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value changesin the event a purchaser doesn't pay.
Banks were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they acquire the money, and they receive payment 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 can a home buyer keep from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook sooner than expected.
Considering it can take countless years to get to the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to understand 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 keep up with the market dynamics of our area. At Graham Appraisal, we're masters at identifying value trends in Glasgow, Barren 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 most often cancel the PMI with little anxiety. At that 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: