Have equity in your home? Want a lower payment? An appraisal from Southeastern Valuation, LLC can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value changes on the chance that a purchaser is unable to pay.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in the event a borrower defaults on the loan and the worth of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the costs, PMI is advantageous for the lender because they acquire the money, and they receive payment 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 home owners avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, acute 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 just 20% of the original amount borrowed, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
A certified, 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 recognize the market dynamics of our area. At Southeastern Valuation, LLC, we know when property values have risen or declined. We're masters at identifying value trends in Trussville, Jefferson County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: