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 widely understood that a 20% down payment is the standard when purchasing a home. Because the liability for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value variationsin the event a borrower defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook a little early. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Floyd Appraisal Works, we know when property values have risen or declined. We're experts at pinpointing value trends in Hohenwald, Lewis County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: