Have equity in your home? Want a lower payment? An appraisal from Timely Appraisal Services can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value changesin the event a purchaser defaults.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take many years to reach the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things calmed down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Timely Appraisal Services, we're experts at determining value trends in Quinlan, Hunt 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 often do away with the PMI with little effort. At which 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: