Have equity in your home? Want a lower payment? An appraisal from Appraisals Plus can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. The lender's liability is usually only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's money-making for the lender because they secure the money, and they get the money if the borrower defaults, 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 can a home owner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook sooner than expected. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
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 appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things settled down.
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 difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Appraisals Plus, we're experts at identifying value trends in Philadelphia, Philadelphia County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little effort. 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: