Have equity in your home? Want a lower payment? An appraisal from Watson Appraisal Services, Inc can help you get rid of your PMI.
It's widely known that a 20% down payment is the standard when purchasing a home. The lender's liability is generally only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they obtain the money, and they receive payment 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 home buyer refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends signify falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Watson Appraisal Services, Inc, we know when property values have risen or declined. We're experts at identifying value trends in Raleigh, Wake County and surrounding areas. Faced with information from an appraiser, the mortgage company will often remove the PMI with little effort. 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: