Have equity in your home? Want a lower payment? An appraisal from Verschelden Appraisals can help you get rid of your PMI.
It's widely known that a 20% down payment is accepted when getting a mortgage. The lender's risk is usually only the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a purchaser defaults.
Lenders were working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's favorable for the lender because they obtain the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers 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 equals 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have gained equity before things calmed down.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Verschelden Appraisals, we're experts at pinpointing value trends in Modesto, Stanislaus County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. 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: