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. Because the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value variationson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower is unable to pay on the loan and the worth of the property is lower than what is owed on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little earlier.
Because it can take many years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things cooled off.
The hardest thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Giles Appraisal Group, Inc., we're masters at analyzing value trends in Panama City, Bay County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: