Have equity in your home? Want a lower payment? An appraisal from Contact Appraisals can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuations in the event a borrower defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 makes 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 pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little early.
Because it can take many years to reach the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends signify falling home values, you should realize that real estate is local.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Contact Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Lebanon, Lebanon County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little effort. 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: