Have equity in your home? Want a lower payment? An appraisal from Greg Easter Appraisals can help you get rid of your PMI.
It's widely known that a 20% down payment is accepted when purchasing a home. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a borrower is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower defaults on the loan and the value of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they acquire the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have gained equity before things calmed down.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Greg Easter Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Mount Juliet, Davidson County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: