Have equity in your home? Want a lower payment? An appraisal from Mitchell Appraisals can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from bearing the cost 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 primary loan amount. Smart home owners can get off the hook beforehand. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has increased in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends hint at plummeting home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things cooled off.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Mitchell Appraisals, we know when property values have risen or declined. We're masters at identifying value trends in Navarre, Santa Rosa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which 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: