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 purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value changesin the event a purchaser doesn't pay.
Banks were working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's lucrative for the lender because they acquire the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop 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 home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook sooner than expected.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things calmed down.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At James Earp Appraisal Service, we're experts at recognizing 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 usually eliminate the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: