Have equity in your home? Want a lower payment? An appraisal from Graham Appraisal can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. Considering the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and typical value variationson the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the value of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they collect the money, and they get the money 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 owner prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends signify plunging home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Graham Appraisal, we know when property values have risen or declined. We're experts at pinpointing value trends in Glasgow, Barren County and surrounding areas. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: