Have equity in your home? Want a lower payment? An appraisal from A. M. Appraisals can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is generally only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value changes on the chance that a purchaser doesn't pay.
Lenders were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they collect the money, and they get the money 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 can a home buyer prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel 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 just 80 percent. So, smart homeowners can get off the hook a little early.
Because it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
The hardest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At A. M. Appraisals, we're experts at analyzing value trends in West Columbia, Lexington 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 most often eliminate the PMI with little trouble. At that time, the homeowner 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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