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 understood that a 20% down payment is accepted when purchasing a home. Because the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changesin the event a borrower defaults.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan.
PMI is pricey to a borrower 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. Separate from a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they acquire the money, and they get paid 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 homebuyers can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook a little earlier.
Because it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's important to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
The toughest thing for many home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their 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. Faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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