Have equity in your home? Want a lower payment? An appraisal from Performance Appraisals Inc. can help you get rid of your PMI.
It's generally inferred that a 20% down payment is accepted when buying a house. Since the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changesin the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it was common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the worth of the house is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they collect the money, and they receive payment if the borrower defaults, contradictory to 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 homebuyers can avoid paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook ahead of time.
Considering it can take countless years to reach the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things settled down.
The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Performance Appraisals Inc., we know when property values have risen or declined. We're masters at identifying value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that 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: