Have equity in your home? Want a lower payment? An appraisal from Anderson Appraisal, LLC can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuationsin the event a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event 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 rolled into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid paying PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things calmed down.
The difficult thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Anderson Appraisal, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Amarillo, Randall County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: