Have equity in your home? Want a lower payment? An appraisal from Columbus Appraisal Company, LLC can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Considering the liability for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value variationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower doesn't pay on the loan and the market price of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they collect the money, and they get paid 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 can buyers avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little earlier.
Since it can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, any appreciation you've achieved 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 may not be adopting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our 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 figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: