Have equity in your home? Want a lower payment? An appraisal from Thomas W. Steinhart can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser is unable to pay.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the worth of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they acquire 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 a homebuyer keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.
Because it can take many years to get to the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Thomas W. Steinhart, we're masters at analyzing value trends in Westfield, Hamilton County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little trouble. At which 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: