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 typically the standard. The lender's risk is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a borrower doesn't pay.
Banks were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is lucrative for the lender because they secure the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute homeowners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's essential to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have gained equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Columbus Appraisal Company, LLC, we're masters at recognizing value trends in Westerville, Franklin County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally cancel 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: