Have equity in your home? Want a lower payment? An appraisal from Mitchell Appraisals can help you get rid of your PMI.
A 20% down payment is usually the standard when buying a house. Considering the risk for the lender is generally only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value changeson the chance that a borrower doesn't pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. It's favorable for the lender because they collect the money, and they get paid if the borrower is unable to pay, unlike 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 cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook sooner than expected. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things settled down.
The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Mitchell Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Navarre, Santa Rosa County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. 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: