Have equity in your home? Want a lower payment? An appraisal from Baker Appraisal Services, Inc. can help you get rid of your PMI.
A 20% down payment is typically the standard when purchasing a home. Because the liability for the lender is often only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variationson the chance that a purchaser defaults.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the home is less than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home 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 equals 78 percent of the initial loan amount. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little earlier.
Since it can take countless years to get to the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has appreciated in value. After all, any appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Baker Appraisal Services, Inc., we're experts at recognizing value trends in Camden, Kent County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: