Let Barnes Appraisal Company help you figure out if you can get rid of your PMI
It's widely inferred that a 20% down payment is common when buying a house. The lender's liability is generally only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations on the chance that 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 last decade. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender if a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they secure the money, and they get paid 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 can a home buyer refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute home owners can get off the hook sooner than expected. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original loan amount, so it's important to know how your home has grown in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends hint at falling home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things settled 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 know when property values have risen or declined. We're experts at recognizing value trends in Lawton, Comanche County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: