Have equity in your home? Want a lower payment? An appraisal from Performance Appraisals Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value changes in the event a borrower defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they acquire the money, and they get paid 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 homebuyers refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart home owners can get off the hook beforehand. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends signify falling home values, you should realize that real estate is local.
The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Performance Appraisals Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which 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: