Let Columbus Appraisal Company, LLC help you learn if you can eliminate your PMI
A 20% down payment is typically accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser defaults.
Banks were taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they get the money if the borrower doesn't pay, opposite from 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 home buyer prevent paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy home owners can get off the hook sooner than expected. The law stipulates 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 necessary to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult 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 know when property values have risen or declined. We're experts at pinpointing value trends in Columbus, Franklin County and surrounding areas. When faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: