Have equity in your home? Want a lower payment? An appraisal from Baker Appraisal Services, Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is generally only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the worth of the property is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the losses, PMI is profitable for the lender because they collect the money, and they get paid 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 buyer keep from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law promises that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at plummeting home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Baker Appraisal Services, Inc., we're experts at identifying value trends in Camden, Kent County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little trouble. 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: