Let Weaver Appraisal Group help you learn if you can eliminate your PMI
When getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they collect the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little early.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify plunging home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things calmed down.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their 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 information from an appraiser, the mortgage company will usually eliminate 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: