Have equity in your home? Want a lower payment? An appraisal from McCarthy Real Estate, Inc., Appraisal Services can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. Since the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value changeson the chance that a purchaser defaults.
Banks were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower is unable to pay on the loan and the market price of the property is less 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 can be expensive to a borrower. It's favorable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, unlike 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 can a home owner avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook sooner than expected. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At McCarthy Real Estate, Inc., Appraisal Services, we're experts at pinpointing value trends in Marietta, Washington 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 often drop the PMI with little anxiety. 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: