Let Barnes Appraisal Company help you learn if you can eliminate your PMI
A 20% down payment is typically accepted when getting a mortgage. Since the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan protects the lender in the event a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they collect the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can avoid bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated 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 homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at plunging home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could 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 hard thing to know. It's an appraiser's job to know the market dynamics of their 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 figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: