Let Columbus Appraisal Company, LLC help you figure out if you can get rid of your PMI
When purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value changeson the chance that a purchaser defaults.
Lenders were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower is unable to pay on the loan and the worth of the house is less than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they acquire 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 homebuyers can keep from bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced 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 a little early. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Because it can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
The difficult thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Columbus Appraisal Company, LLC, we know when property values have risen or declined. We're masters at identifying value trends in Westerville, Franklin County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: