Let Giles Appraisal Group, Inc. help you determine if you can eliminate your PMI
It's largely understood that a 20% down payment is accepted when purchasing a home. Considering the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value changesin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook ahead of time. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Because it can take many years to reach the point where the principal is only 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends predict plunging home values, you should understand 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 hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Giles Appraisal Group, Inc., we're masters at pinpointing value trends in Panama City, Bay County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little trouble. 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: