Let Verschelden Appraisals help you discover if you can get rid of your PMI
It's largely known that a 20% down payment is the standard when getting a mortgage. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value changes in the event a borrower defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the worth of the property is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they secure the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates 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.
Since it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved 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% mark? Even when nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard 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 experts at determining value trends in Modesto, Stanislaus County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: