Let Allen Appraisal Service help you determine if you can get rid of your PMI
A 20% down payment is usually the standard when buying a house. Considering the liability for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value variationsin the event a purchaser doesn't pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the worth of the property is less than what the borrower still owes on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent bearing the expense of PMI
With the implementation 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 original loan amount. Smart homeowners can get off the hook ahead of time. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends predict decreasing home values, you should realize 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 tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Allen Appraisal Service, we're experts at pinpointing value trends in Washington, Washington 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 drop the PMI with little effort. At which 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.