Have equity in your home? Want a lower payment? An appraisal from AC Realty & Appraisals can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value variationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has appreciated in value. After all, any 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% threshold? Even when nationwide trends predict falling home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things settled down.
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 recognize the market dynamics of their area. At AC Realty & Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Winter, Sawyer County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often remove 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: