Let Columbus Appraisal Company, LLC help you learn if you can get rid of your PMI
A 20% down payment is typically accepted when getting a mortgage. The lender's liability is generally only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the property is lower than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little early.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why pay 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 may have secured equity before things cooled off, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Columbus Appraisal Company, LLC, we're experts at recognizing value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little trouble. At which 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: