Have equity in your home? Want a lower payment? An appraisal from Edwards Appraisal Service, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Because the risk for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and natural value changesin the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in the event a borrower doesn't pay on the loan and the worth of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook ahead of time.
Since it can take many years to reach the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends indicate decreasing home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Edwards Appraisal Service, Inc., we're masters at identifying value trends in Goldsboro, Wayne County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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