Let Barnes Appraisal Company help you figure out if you can get rid of your PMI
It's generally understood that a 20% down payment is common when buying a house. Because the risk for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value changeson the chance that a purchaser doesn't pay.
Banks were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the worth of the house is less than what the borrower still owes on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. It's profitable for the lender because they obtain the money, and they receive payment 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 can buyers keep 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 equals 78 percent of the primary loan amount. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute homeowners 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 original amount of the loan, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Barnes Appraisal Company, we're experts at recognizing value trends in Lawton, Comanche County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: