Have equity in your home? Want a lower payment? An appraisal from Weaver Appraisal Group can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value variationson the chance that a purchaser doesn't pay.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, 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 buyers can refrain from bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.
Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends signify declining home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things simmered down.
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 hard thing to know. It's an appraiser's job to understand the market dynamics of their 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 figures from an appraiser, the mortgage company will usually cancel 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: