Have equity in your home? Want a lower payment? An appraisal from Appraisal Services of Brandon, Inc . can help you get rid of your PMI.
A 20% down payment is typically the standard when buying a house. The lender's liability is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender if a borrower defaults on the loan and the worth of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they collect the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's important 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 should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things cooled off.
The toughest thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal Services of Brandon, Inc ., we're masters at analyzing value trends in Valrico, Hillsborough County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: