Have equity in your home? Want a lower payment? An appraisal from Giles Appraisal Group, Inc. can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Considering the risk for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value variationsin the event a purchaser defaults.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't 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 bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they acquire the money, and they get the money if the borrower defaults, contradictory to a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent paying PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy home owners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things calmed down.
The toughest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Giles Appraisal Group, Inc., we're masters at pinpointing value trends in Panama City, Bay 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 drop the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: