Have equity in your home? Want a lower payment? An appraisal from The Welter Appraisal Group can help you get rid of your PMI.
A 20% down payment is usually accepted when purchasing a home. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationson the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy protects the lender if a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they obtain the money, and they receive payment 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 a buyer avoid bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little earlier.
Because it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends forecast decreasing home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things cooled off.
The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At The Welter Appraisal Group, we know when property values have risen or declined. We're experts at recognizing value trends in Oakhurst, Monmouth County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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: