Have equity in your home? Want a lower payment? An appraisal from Herrin Appraisal Company can help you get rid of your PMI.
It's typically known that a 20% down payment is common when buying a house. Because the risk for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variationson the chance that a borrower doesn't pay.
Banks were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the value of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's favorable 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 damages.
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 bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.
Since it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Herrin Appraisal Company, we're masters at determining value trends in Clemmons, Forsyth County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. 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:
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