Have equity in your home? Want a lower payment? An appraisal from Corrie Appraisal & Consulting, Inc. can help you get rid of your PMI.
It's widely known that a 20% down payment is the standard when buying a house. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value changes in the event a purchaser defaults.
The market was accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the property is less 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 can be pricey to a borrower. It's money-making for the lender because they secure the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute home owners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial amount borrowed, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home could have acquired equity before things settled down.
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 difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Corrie Appraisal & Consulting, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Charleston, Coles County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which 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: