Have equity in your home? Want a lower payment? An appraisal from Floyd Appraisal Works can help you get rid of your PMI.
It's typically known that a 20% down payment is the standard when buying a house. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser doesn't pay.
Banks were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is lucrative for the lender because they acquire the money, and they get the money 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 refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little early.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have gained equity before things calmed down.
The hardest thing for most home owners to know 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 understand the market dynamics of our area. At Floyd Appraisal Works, we're experts at recognizing value trends in Hohenwald, Lewis County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. 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: