Let Barnes Appraisal Company help you learn if you can get rid of your PMI
When buying a house, a 20% down payment is typically the standard. The lender's liability is usually only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value variations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook sooner than expected.
Considering it can take many years to reach the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things simmered down.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Barnes Appraisal Company, we're masters at analyzing value trends in Lawton, Comanche County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little effort. 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: