Have equity in your home? Want a lower payment? An appraisal from Appraisals Plus can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. Because the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value changesin the event a purchaser defaults.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they acquire the money, and they get the money 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 homebuyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook sooner than expected. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Considering it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends signify 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 keep up with the market dynamics of our area. At Appraisals Plus, we're experts at recognizing value trends in Philadelphia, Philadelphia 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 usually do away with the PMI with little anxiety. At which 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: