Have equity in your home? Want a lower payment? An appraisal from Accuracy Matters Appraisals can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Since the risk for the lender is often only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value changesin the event a borrower is unable to pay.
Lenders were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the worth of the house is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. It's profitable for the lender because they collect the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the costs.
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 keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've obtained 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% threshold? Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners 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 know the market dynamics of our area. At Accuracy Matters Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in South Fork, Rio Grande County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: