Have equity in your home? Want a lower payment? An appraisal from Columbus Appraisal Company, LLC can help you get rid of your PMI.
A 20% down payment is typically the standard when purchasing a home. Because the risk for the lender is often only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value changesin the event a purchaser doesn't pay.
Lenders were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower defaults on the loan and the market price of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender consumes all the losses, 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 can a homeowner avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart home owners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take countless years to reach the point where the principal is only 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 the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Columbus Appraisal Company, LLC, we're masters at pinpointing value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which 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: