Have equity in your home? Want a lower payment? An appraisal from Weaver Appraisal Group can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the losses.
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
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook sooner than expected.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
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 tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Weaver Appraisal Group, we're experts at recognizing value trends in Butner, Granville County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: