Have equity in your home? Want a lower payment? An appraisal from Columbus Appraisal Company, LLC can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. Since the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuationson the chance that a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower defaults on the loan and the value of the property is lower than the loan balance.
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 payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they collect the money, and they get paid 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 homebuyers can avoid paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook a little early. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Because it can take many years to arrive at the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things simmered down.
The toughest thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At Columbus Appraisal Company, LLC, we know when property values have risen or declined. We're experts at analyzing value trends in Westerville, Franklin County and surrounding areas. When faced with data from an appraiser, the mortgage company will 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: