Let Allen Appraisal Service help you discover if you can get rid of your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuations on the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower defaults.
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 bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart home owners can get off the hook beforehand. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Considering it can take countless years to reach the point where the principal is just 20% of the original amount borrowed, it's crucial to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things cooled off.
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 Allen Appraisal Service, we know when property values have risen or declined. We're experts at recognizing value trends in Washington, Washington County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.