Have equity in your home? Want a lower payment? An appraisal from South Shore Appraisals can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. The lender's liability is often only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value changes on the chance that a borrower is unable to pay.
Banks were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than what the borrower still owes 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 costly to a borrower. It's lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs 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 buyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute home owners can get off the hook beforehand. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things calmed down.
The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At South Shore Appraisals, we know when property values have risen or declined. We're masters at identifying value trends in Schererville, Lake County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little trouble. 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: