Have equity in your home? Want a lower payment? An appraisal from Performance Appraisals Inc. can help you get rid of your PMI.
A 20% down payment is typically accepted when getting a mortgage. Because the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variationsin the event a borrower doesn't pay.
The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower defaults on the loan and the market price of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they acquire the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs 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 homebuyers keep from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little early.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to know the market dynamics of their area. At Performance Appraisals Inc., we're experts at recognizing value trends in Ponte Vedra Beach, Saint Johns 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 generally drop the PMI with little trouble. At that 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: