Have equity in your home? Want a lower payment? An appraisal from Real Estate Appraisal Services of WI, Inc. can help you get rid of your PMI.
A 20% down payment is typically the standard when purchasing a home. Because the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value changeson the chance that a borrower defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the value of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can keep from bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends hint at falling home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At Real Estate Appraisal Services of WI, Inc., we're masters at pinpointing value trends in Princeton, Green Lake 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 cancel the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: