Have equity in your home? Want a lower payment? An appraisal from Corrie Appraisal & Consulting, Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is generally only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value changes in the event a borrower doesn't pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they secure the money, and they get the money 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 home owners prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute home owners can get off the hook ahead of time.
It can take many years to reach the point where the principal is only 20% of the original loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things simmered down.
The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Corrie Appraisal & Consulting, Inc., we're experts at analyzing value trends in Charleston, Coles County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: