Have equity in your home? Want a lower payment? An appraisal from Mitchell Appraisals can help you get rid of your PMI.
It's largely known that a 20% down payment is accepted when getting a mortgage. The lender's risk is often only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the deficits, PMI is advantageous for the lender because they obtain the money, and they get paid 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 buyer refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take many years to reach the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Mitchell Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in MILTON, Santa Rosa County and surrounding areas. When faced with data 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: