Have equity in your home? Want a lower payment? An appraisal from James Earp Appraisal Service can help you get rid of your PMI.
It's typically inferred that a 20% down payment is the standard when getting a mortgage. The lender's risk is generally only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower defaults on the loan and the value of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they obtain 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 can homeowners prevent paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute homeowners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the original loan amount, it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate falling home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home might have gained equity before things cooled off.
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 difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At James Earp Appraisal Service, we're masters at determining value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: