Have equity in your home? Want a lower payment? An appraisal from Performance Appraisals Inc. can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. The lender's liability is often only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is less than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. It's profitable for the lender because they collect the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from bearing the expense 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 reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook a little earlier. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Performance Appraisals Inc., we're masters at identifying value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: