Let AC Realty & Appraisals help you discover if you can eliminate your PMI
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the sum due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they secure 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 a homeowner keep from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's necessary 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 what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends hint at declining home values, you should understand that real estate is local.
The difficult 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 surely help. As appraisers, it's our job to recognize the market dynamics of our area. At AC Realty & Appraisals, we're experts at identifying value trends in Winter, Sawyer County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often eliminate 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: