Have equity in your home? Want a lower payment? An appraisal from Floyd Appraisal Works can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value variations in the event a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan covers the lender if a borrower defaults on the loan and the market price of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they obtain the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes 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 keep from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook a little earlier. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things cooled off.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Floyd Appraisal Works, we're experts at identifying value trends in Hohenwald, Lewis County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often drop 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: