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 largely known that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value variationson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they obtain the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Edwards Appraisal Service, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Goldsboro, Wayne County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which 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:
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