Have equity in your home? Want a lower payment? An appraisal from A Bright Appraisal can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the value of the home is less than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they secure 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 buyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
The difficult thing for many homeowners to understand 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 understand the market dynamics of their area. At A Bright Appraisal, we're experts at identifying value trends in DOUGLASVILLE, Douglas County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which 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: