Have equity in your home? Want a lower payment? An appraisal from Giles Appraisal Group, Inc. can help you get rid of your PMI.
It's widely understood that a 20% down payment is common when buying a house. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variations in the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it was customary to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower is unable to pay on the loan and the market price of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook a little early. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards removing 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 secured equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
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 tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Giles Appraisal Group, Inc., we know when property values have risen or declined. We're experts at determining value trends in Panama City, Bay County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little effort. At that 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: