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 typically the standard when getting a mortgage. Because the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion 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 requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the losses.
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 bearing the expense of PMI?
With the implementation 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 original loan amount. Keen homeowners can get off the hook a little earlier. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends forecast plunging home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At James Earp Appraisal Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Raleigh, Wake County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: