Have equity in your home? Want a lower payment? An appraisal from Appraisals Plus can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the market price of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they acquire the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little earlier.
It can take many years to reach the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Appraisals Plus, we know when property values have risen or declined. We're masters at analyzing value trends in Philadelphia, Philadelphia County and surrounding areas. When faced with information from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: