Have equity in your home? Want a lower payment? An appraisal from The Welter Appraisal Group can help you get rid of your PMI.
It's largely understood that a 20% down payment is accepted when buying a house. The lender's liability is generally only the difference between the home value and the sum due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy covers the lender in case a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they collect 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 can a homeowner keep from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook ahead of time. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At The Welter Appraisal Group, we know when property values have risen or declined. We're experts at determining value trends in Oakhurst, Monmouth County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: