Have equity in your home? Want a lower payment? An appraisal from Mitchell Appraisals can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the damages, PMI is profitable for the lender because they acquire the money, and they receive payment 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 a home buyer keep from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise homeowners can get off the hook a little earlier. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends predict declining home values, you should realize that real estate is local.
The toughest thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Mitchell Appraisals, we know when property values have risen or declined. We're masters at determining value trends in MILTON, Santa Rosa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: