Have equity in your home? Want a lower payment? An appraisal from Absolute Appraisals, IMI. can help you get rid of your PMI.
A 20% down payment is usually accepted when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the property is less than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get the money if the borrower doesn't pay, opposite from 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 can a homeowner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's essential to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends indicate declining 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. It's an appraiser's job to know the market dynamics of their area. At Absolute Appraisals, IMI., we're experts at determining value trends in Saline, Washtenaw County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. 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: