Have equity in your home? Want a lower payment? An appraisal from Appraisal Connection can help you get rid of your PMI.
It's typically known that a 20% down payment is common when getting a mortgage. The lender's liability is usually only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser 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. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender if a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's money-making for the lender because they collect the money, and they get paid if the borrower defaults, opposite from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can prevent bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy homeowners can get off the hook ahead of time. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years 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 hint at decreasing home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal Connection, we're experts at pinpointing value trends in Hampton, Rockingham County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that 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: