Let Graham Appraisal help you determine if you can get rid of your PMI
A 20% down payment is typically accepted when buying a house. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the property is lower than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they secure the money, and they receive payment 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 buyer refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little earlier. The law pledges that, at the request of the homeowner, 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 original amount of the loan, it's crucial to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends indicate decreasing 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 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 most often remove the PMI with little anxiety. 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: