Have equity in your home? Want a lower payment? An appraisal from David Hesidenz Appraisals can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Because the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value changeson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower doesn't pay on the loan and the market price of the home is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
With the employment 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. Keen home owners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify plummeting home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have acquired equity before things settled down.
A certified, 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 know the market dynamics of our area. At David Hesidenz Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Butler, Butler County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: