Have equity in your home? Want a lower payment? An appraisal from Allen Appraisal Service can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Because the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser doesn't pay.
Banks were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.
Because it can take many years to reach the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Allen Appraisal Service, we know when property values have risen or declined. We're masters at identifying value trends in St. George, Washington County and surrounding areas. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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