Have equity in your home? Want a lower payment? An appraisal from Columbus Appraisal Company, LLC can help you get rid of your PMI.
It's typically known that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value variationsin the event a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the value of the house is lower than what is owed on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they secure the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute homeowners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends predict declining home values, you should understand that real estate is local.
The hardest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Columbus Appraisal Company, LLC, we're masters at pinpointing value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally remove the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: