Have equity in your home? Want a lower payment? An appraisal from Barnes Appraisal Company can help you get rid of your PMI.
It's generally inferred that a 20% down payment is the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Because it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Barnes Appraisal Company, we know when property values have risen or declined. We're experts at determining value trends in Lawton, Comanche County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally eliminate 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: