Let Columbus Appraisal Company, LLC help you discover if you can get rid of your PMI
When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changeson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the worth of the property is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little earlier.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at decreasing home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things calmed down.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Columbus Appraisal Company, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Westerville, Franklin County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: