Have equity in your home? Want a lower payment? An appraisal from APPRAISAL EXPRESS, INC can help you get rid of your PMI.
It's generally understood that a 20% down payment is accepted when buying a house. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and typical value changesin the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in case a borrower defaults on the loan and the value of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they acquire the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at falling home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things simmered down.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At APPRAISAL EXPRESS, INC, we're experts at pinpointing value trends in Durango, La Plata 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 eliminate the PMI with little anxiety. At that 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: