Let Giles Appraisal Group, Inc. help you discover if you can eliminate your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the value of the home is lower than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is advantageous for the lender because they acquire the money, and they get paid 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 owner avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, wise home owners can get off the hook ahead of time.
It can take countless years to reach the point where the principal is just 20% of the original amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify plunging home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired 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 tough thing to know. As appraisers, it's our job to know the market dynamics of our 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 information from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. 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: