Have equity in your home? Want a lower payment? An appraisal from Barnes Appraisal Company can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is generally only the remainder between the home value and the amount due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value variations on the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower doesn't pay on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they secure the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook a little earlier. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends signify falling home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know 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 figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: