Let Graham Appraisal help you discover if you can eliminate your PMI
A 20% down payment is typically accepted when getting a mortgage. Because the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a purchaser defaults.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the worth of the house is lower than what is owed on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Considering it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things calmed down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard 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 experts at pinpointing value trends in Glasgow, Barren County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: