Have equity in your home? Want a lower payment? An appraisal from Appraisals Plus can help you get rid of your PMI.
It's generally understood that a 20% down payment is accepted when getting a mortgage. Considering the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changeson the chance that a borrower is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is advantageous 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 refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook a little early. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Because it can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to understand the market dynamics of their area. At Appraisals Plus, we're experts at pinpointing 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 most often drop the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: