Have equity in your home? Want a lower payment? An appraisal from Pierce Appraisal can help you get rid of your PMI.
It's widely understood that a 20% down payment is common when purchasing a home. Since the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value changesin the event a borrower defaults.
Banks were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. It's profitable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the damages.
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 cost 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 initial loan amount. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen 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 important to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying 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.
An accredited, licensed real estate appraiser can help home owners 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 keep up with the market dynamics of our area. At Pierce Appraisal, we know when property values have risen or declined. We're experts at pinpointing value trends in Gering, Scotts Bluff County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: