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 usually accepted when getting a mortgage. The lender's risk is often only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a borrower defaults.
Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on 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. Separate from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little early. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
Because it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things simmered down.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Weaver Appraisal Group, we know when property values have risen or declined. We're experts at determining value trends in Butner, Granville County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually drop the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: