Let Pierce Appraisal help you discover if you can get rid of your PMI
When purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser defaults.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender if a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can keep from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute home owners can get off the hook a little early.
It can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify declining home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with 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 usually remove the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: