Let James Earp Appraisal Service help you determine if you can eliminate your PMI
A 20% down payment is usually accepted when purchasing a home. Because the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the worth of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from paying PMI
With the employment 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 beginning loan amount. Smart homeowners can get off the hook beforehand. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Because it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things calmed down.
The difficult thing for many home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At James Earp Appraisal Service, we're masters at determining 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 often remove the PMI with little effort. 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: