Have equity in your home? Want a lower payment? An appraisal from South Shore Appraisals can help you get rid of your PMI.
It's widely known that a 20% down payment is accepted when getting a mortgage. Considering the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value changeson the chance that a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender in case a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they obtain the money, and they get paid 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 home owner avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen homeowners can get off the hook a little earlier.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends forecast plummeting home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things cooled off.
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 hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At South Shore Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Schererville, Lake County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. 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: