Let Weaver Appraisal Group help you learn if you can get rid of your PMI
When buying a house, a 20% down payment is usually the standard. The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender if a borrower defaults on the loan and the value of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Opposite from a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they secure the money, and they get paid if the borrower is unable to pay.
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 paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook a little earlier.
Since it can take many years to get to the point where the principal is just 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
An accredited, 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. As appraisers, it's our job to keep up with the market dynamics of our area. At Weaver Appraisal Group, we know when property values have risen or declined. We're masters at recognizing value trends in Butner, Granville County and surrounding areas. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which 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: