Let Columbus Appraisal Company, LLC help you figure out if you can eliminate your PMI
It's largely known that a 20% down payment is common when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value changes on the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they acquire the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to get to 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 increased in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify plummeting home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things calmed down.
The hardest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It's 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 masters at recognizing value trends in Westerville, Franklin County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that 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: