Have equity in your home? Want a lower payment? An appraisal from Graham Appraisal can help you get rid of your PMI.
A 20% down payment is typically the standard when buying a house. Because the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower defaults.
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 handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they get paid if the borrower defaults, opposite from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from bearing the cost of PMI?
With the employment 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 original loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Graham Appraisal, we're masters at recognizing value trends in Glasgow, Barren County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: