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 typically the standard. Since the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value changesin the event a purchaser doesn't pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is lucrative for the lender because they obtain the money, and they receive payment 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 can a home buyer prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook beforehand. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
The difficult thing for almost all homeowners 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 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 generally cancel the PMI with little anxiety. At that 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: