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 the standard when getting a mortgage. Considering 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 expenses of foreclosure, reselling the home, and typical value variationson the chance that a purchaser doesn't pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they acquire the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little early. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have acquired 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. It is an appraiser's job to recognize the market dynamics of their area. At Performance Appraisals Inc., we're experts at pinpointing value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally do away with 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: