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 usually accepted when getting a mortgage. Considering the risk for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get the money if the borrower is unable to pay, 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 home owners can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook sooner than expected. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 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 the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things calmed down.
An accredited, 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 Graham Appraisal, we know when property values have risen or declined. We're masters at recognizing value trends in Glasgow, Barren County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: