Have equity in your home? Want a lower payment? An appraisal from Edwards Appraisal Service, Inc. can help you get rid of your PMI.
It's generally understood that a 20% down payment is the standard when getting a mortgage. The lender's risk is often only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender if a borrower defaults on the loan and the value of the property is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they secure the money, and they get the money 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 can a home buyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at decreasing home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things calmed down.
The toughest thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Edwards Appraisal Service, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Goldsboro, Wayne County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
|These articles are property of New York Times and protected by copyright.|