Have equity in your home? Want a lower payment? An appraisal from Anderson Appraisal, LLC can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value variations in the event a borrower is unable to pay.
Lenders were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they acquire 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 can a home buyer prevent bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook a little earlier. The law guarantees that, at the 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 necessary to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards removing 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 following the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends predict declining home values, you should realize that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Anderson Appraisal, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Amarillo, Randall County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. 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: