Have equity in your home? Want a lower payment? An appraisal from Allen Appraisal Service can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Considering the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners prevent paying 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 primary loan amount. Wise home owners can get off the hook ahead of time. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take many years to reach the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
The toughest thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Allen Appraisal Service, we know when property values have risen or declined. We're experts at pinpointing value trends in St. George, Washington County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often drop 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:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.