Have equity in your home? Want a lower payment? An appraisal from South Shore Appraisals can help you get rid of your PMI.
It's widely known that a 20% down payment is common when getting a mortgage. Since the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value variationsin the event a borrower defaults.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender if a borrower is unable to pay on the loan and the worth of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they acquire the money, and they get paid if the borrower defaults, different 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 can homebuyers keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things settled down.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At South Shore Appraisals, we're masters at pinpointing value trends in Schererville, Lake 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 usually cancel the PMI with little effort. 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: