Have equity in your home? Want a lower payment? An appraisal from Accuracy Matters Appraisals can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. The lender's risk is often only the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value variations in the event a borrower doesn't pay.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower doesn't pay on the loan and the value of the property is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they secure the money, and they get the money if the borrower defaults, contradictory to a piggyback loan where the lender takes in 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 prevent bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Accuracy Matters Appraisals, we're masters at determining value trends in South Fork, Rio Grande County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally drop 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: