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 accepted when purchasing a home. Because the liability for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they acquire the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute home owners can get off the hook sooner than expected.
Since it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things calmed down.
The toughest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Graham Appraisal, we're experts at recognizing value trends in Glasgow, Barren County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: