Have equity in your home? Want a lower payment? An appraisal from Mike Noble Appraisals can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. Since the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value changesin the event a borrower is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the worth of the property is lower than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, upon 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 a little early.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, any appreciation you've acquired 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? Despite the fact that nationwide trends predict plunging 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 calmed down.
The hardest thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Mike Noble Appraisals, we're experts at identifying value trends in Montgomery, Elmore County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At that 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: