Let James Earp Appraisal Service help you discover if you can eliminate your PMI
It's generally understood that a 20% down payment is accepted when getting a mortgage. Because the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser is unable to pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy 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 balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender absorbs all the deficits.
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 expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the initial loan amount, it's important to know how your home has increased in value. After all, any appreciation you've gained over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At James Earp Appraisal Service, we're experts at determining value trends in Raleigh, Wake 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 remove the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: