Have equity in your home? Want a lower payment? An appraisal from Weaver Appraisal Group 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 often only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value changes in the event a purchaser is unable to pay.
The market was accepting 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 added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the worth of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little earlier.
It can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things cooled off.
The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Weaver Appraisal Group, we're masters at analyzing value trends in Butner, Granville County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often remove the PMI with little trouble. At which 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: