Have equity in your home? Want a lower payment? An appraisal from Verschelden Appraisals can help you get rid of your PMI.
It's largely understood that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value changeson the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is money-making for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends indicate decreasing 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 goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Verschelden Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Modesto, Stanislaus County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: