Have equity in your home? Want a lower payment? An appraisal from Pierce Appraisal can help you get rid of your PMI.
It's largely inferred that a 20% down payment is accepted when purchasing a home. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser defaults.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the market price of the house is less 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 frequently isn't even tax deductible. It's money-making for the lender because they collect the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook beforehand. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Pierce Appraisal, we're experts at recognizing value trends in Gering, Scotts Bluff County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: