Have equity in your home? Want a lower payment? An appraisal from Giles Appraisal Group, Inc. can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Considering the risk for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changesin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay.
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 refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify plunging home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things simmered down.
The toughest thing for many home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Giles Appraisal Group, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Panama City, Bay County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: