Have equity in your home? Want a lower payment? An appraisal from James Earp Appraisal Service can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. Considering the risk for the lender is generally only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value changeson the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs 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 home buyer keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel 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 abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home might have gained equity before things calmed 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 tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At James Earp Appraisal Service, we know when property values have risen or declined. We're masters at determining value trends in Raleigh, Wake County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: