Have equity in your home? Want a lower payment? An appraisal from Brown Appraisal Associates can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations in the event a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased 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 worth of the property is lower than the loan balance.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. It's money-making for the lender because they secure the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends signify falling home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Brown Appraisal Associates, we're masters at determining value trends in Greenwood, Greenwood County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that 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: