Let Columbus Appraisal Company, LLC help you determine if you can eliminate your PMI
It's typically understood that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value changesin the event a borrower is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they collect the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook ahead of time. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above 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 Columbus Appraisal Company, LLC, we're masters at determining value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: