Have equity in your home? Want a lower payment? An appraisal from James Earp Appraisal Service can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. Considering the risk for the lender is often only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value variationson the chance that a borrower is unable to pay.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the deficits, PMI is money-making 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 buyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute home owners can get off the hook sooner than expected.
Since it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify declining home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have acquired equity before things settled down.
The difficult thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At James Earp Appraisal Service, we're masters at pinpointing value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: