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 usually the standard when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value changes on the chance that a purchaser defaults.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower defaults on the loan and the market price of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook sooner than expected.
It can take countless years to reach the point where the principal is only 20% of the original amount of the loan, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners 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 understand the market dynamics of our area. At Baker Appraisal Services, Inc., we're masters at determining value trends in Camden, Kent County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: