Have equity in your home? Want a lower payment? An appraisal from Amerappraise, LLC can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the property is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook beforehand. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends signify falling home values, you should realize that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Amerappraise, LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Bear, New Castle County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: