Have equity in your home? Want a lower payment? An appraisal from AC Realty & Appraisals can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value changeson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender in the event a borrower defaults on the loan and the value of the house is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the deficits.
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 employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little earlier. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends signify declining home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At AC Realty & Appraisals, we're experts at determining value trends in Winter, Sawyer County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: