Let Barnes Appraisal Company help you discover if you can get rid of your PMI
When buying a house, a 20% down payment is typically the standard. Since the risk for the lender is often only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuationsin the event a borrower is unable to pay.
Banks were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan covers the lender if a borrower is unable to pay on the loan and the worth of the home is less than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's advantageous for the lender because they secure the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the deficits.
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 bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things simmered 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 tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Barnes Appraisal Company, we're masters at analyzing value trends in Lawton, Comanche County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. 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: