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 buying a house. Because the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuationsin the event a purchaser doesn't pay.
Banks were 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 handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy covers 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 can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner prevent paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise home owners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Because it can take countless 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 grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured 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 tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Graham Appraisal, we're masters at determining value trends in Glasgow, Barren County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: