Let Barnes Appraisal Company help you figure out if you can eliminate your PMI
It's generally known that a 20% down payment is the standard when purchasing a home. Considering the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changesin the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's profitable for the lender because they collect the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, savvy home owners can get off the hook ahead of time.
Considering it can take countless years to get to the point where the principal is only 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 accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Barnes Appraisal Company, we know when property values have risen or declined. We're experts at determining value trends in Lawton, Comanche County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which 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: