Have equity in your home? Want a lower payment? An appraisal from Quinsigamond Appraisal Services 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 generally only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value variationson the chance that a borrower doesn't pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they obtain the money, and they get the money if the borrower doesn't 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 buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise home owners can get off the hook ahead of time.
Since it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home might have acquired equity before things cooled off.
A certified, licensed real estate appraiser can help home owners 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 know the market dynamics of their area. At Quinsigamond Appraisal Services, we know when property values have risen or declined. We're experts at analyzing value trends in Worcester, Worcester County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually remove 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: