Have equity in your home? Want a lower payment? An appraisal from Columbus Appraisal Company, LLC can help you get rid of your PMI.
It's widely understood that a 20% down payment is common when getting a mortgage. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value variations on the chance that a borrower doesn't pay.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they obtain the money, and they get the money if the borrower is unable to pay, different from a piggyback loan where the lender consumes 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 a homeowner keep from paying 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 beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take countless years to reach the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things calmed down.
The toughest thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Columbus Appraisal Company, LLC, we know when property values have risen or declined. We're masters at determining value trends in Westerville, Franklin County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: