Have equity in your home? Want a lower payment? An appraisal from Angelo Appraisal Service, Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changeson the chance that a borrower defaults.
Banks were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off.
The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Angelo Appraisal Service, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in EDMOND, Oklahoma County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: