Have equity in your home? Want a lower payment? An appraisal from Weaver Appraisal Group can help you get rid of your PMI.
A 20% down payment is typically accepted when getting a mortgage. Considering the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser defaults.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they acquire the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender takes in 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 buyers keep from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart home owners can get off the hook ahead of time.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends predict decreasing home values, you should understand 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 difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Weaver Appraisal Group, we know when property values have risen or declined. We're masters at analyzing value trends in Butner, Granville County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often cancel the PMI with little trouble. 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: