Let Accuracy Matters Appraisals help you discover if you can get rid of your PMI
When purchasing a home, a 20% down payment is typically the standard. Considering the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower doesn't pay on the loan and the market price of the property is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can 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 reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
The hardest 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 definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Accuracy Matters Appraisals, we're experts at pinpointing value trends in South Fork, Rio Grande County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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: