Let Giles Appraisal Group, Inc. help you decide if you can get rid of your PMI
It's widely known that a 20% down payment is accepted when getting a mortgage. Since the liability for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value changesin the event a borrower is unable to pay.
Banks were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the deficits, PMI is advantageous for the lender because they collect 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 homebuyers prevent paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.
The hardest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Giles Appraisal Group, Inc., we're masters at determining value trends in Panama City, Bay County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often do away with 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: