Have equity in your home? Want a lower payment? An appraisal from Polaris Real Estate & Appraisal, Inc. can help you get rid of your PMI.
It's widely known that a 20% down payment is common when getting a mortgage. The lender's liability is generally only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook sooner than expected. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take many years to arrive at the point where the principal is only 20% of the initial loan amount, it's important to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.
A certified, 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 understand the market dynamics of our area. At Polaris Real Estate & Appraisal, Inc., we're masters at identifying value trends in Stuart, Martin County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: