Have equity in your home? Want a lower payment? An appraisal from Carol Huffman can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Considering the risk for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value changeson the chance that a borrower defaults.
Banks were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender if a borrower doesn't 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 lumped into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs 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 homeowners keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast plunging home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things calmed down.
The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Carol Huffman, we know when property values have risen or declined. We're masters at analyzing value trends in Lamar, Johnson County and surrounding areas. When faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: