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 buying a house. The lender's liability is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in case a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they secure 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 can a home buyer prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.
It can take countless years to reach the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends predict plummeting 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 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 Mike Noble Appraisals, we're experts at recognizing value trends in Montgomery, Elmore County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little trouble. 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: