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 getting a mortgage, a 20% down payment is usually the standard. The lender's risk is often only the difference between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the value of the home is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get the money if the borrower defaults, unlike 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 a buyer refrain from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, wise home owners can get off the hook a little earlier.
Because it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends indicate declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Columbus Appraisal Company, LLC, we're experts at determining 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 cancel the PMI with little anxiety. 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: