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 typically the standard when purchasing a home. Considering the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuationson the chance that a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the worth of the property is lower than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower defaults, contradictory to 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 a buyer refrain from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little earlier.
Since it can take countless years to arrive at the point where the principal is only 20% of the original loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify decreasing home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things simmered down.
The toughest thing for most homeowners to understand 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 know the market dynamics of our area. At South Shore Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Schererville, Lake County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: