Have equity in your home? Want a lower payment? An appraisal from Weaver Appraisal Group can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the worth of the home is lower than the loan balance.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook a little early. The law promises that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Weaver Appraisal Group, we're masters at determining value trends in Butner, Granville County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate 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: