Have equity in your home? Want a lower payment? An appraisal from Columbus Appraisal Company, LLC can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is usually only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower defaults on the loan and the worth of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid paying PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook ahead of time. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things calmed down.
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. It's an appraiser's job to understand the market dynamics of their area. At Columbus Appraisal Company, LLC, we're experts at analyzing value trends in Westerville, Franklin 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 often drop the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: