Have equity in your home? Want a lower payment? An appraisal from Graham Appraisal can help you get rid of your PMI.
It's typically understood that a 20% down payment is accepted when getting a mortgage. The lender's risk is often only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes in the event a borrower defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. 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 is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen homeowners can get off the hook a little early. The law promises that, at the request of the homeowner, 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 amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult 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 masters at identifying value trends in Glasgow, Barren County and surrounding areas. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: