Let Giles Appraisal Group, Inc. help you determine if you can eliminate your PMI
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value changeson the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in the event a borrower defaults on the loan and the worth of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Giles Appraisal Group, Inc., we're masters at identifying 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 most often do away with the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: