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 largely known that a 20% down payment is common when getting a mortgage. The lender's risk is generally only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changes in the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
Considering it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Watson Appraisal Services, Inc, we're masters at determining value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally remove 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: