Have equity in your home? Want a lower payment? An appraisal from Baker Appraisal Services, Inc. can help you get rid of your PMI.
It's largely inferred that a 20% down payment is common when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a borrower is unable to pay.
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. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. It's profitable for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook ahead of time. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At Baker Appraisal Services, Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Camden, Kent County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: