Have equity in your home? Want a lower payment? An appraisal from Furr Appraisal Service can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. 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 costs of foreclosure, selling the home again, and typical value changesin the event a borrower 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. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they secure the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can avoid paying PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to reach the point where the principal is just 20% of the original loan amount, so it's important to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends signify plummeting home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things simmered down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Furr Appraisal Service, we know when property values have risen or declined. We're masters at pinpointing value trends in Camden, Benton County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: