Have equity in your home? Want a lower payment? An appraisal from Giles Appraisal Group, Inc. can help you get rid of your PMI.
It's generally known that a 20% down payment is the standard when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value changes in the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is profitable for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little early.
Since it can take many years to reach the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Giles Appraisal Group, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in Panama City, Bay County and surrounding areas. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little anxiety. 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: