Have equity in your home? Want a lower payment? An appraisal from James Earp Appraisal Service can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Because the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value variationson the chance that a purchaser is unable to 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 endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they collect the money, and they get the money 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 buyers keep from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart home owners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Since it can take many years to arrive at the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
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 difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At James Earp Appraisal Service, we know when property values have risen or declined. We're experts at identifying value trends in Raleigh, Wake County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: