Have equity in your home? Want a lower payment? An appraisal from Country Manor can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. Because the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can avoid bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart home owners can get off the hook beforehand. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Country Manor, we're masters at determining value trends in Medina, Medina 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 often cancel 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: