Have equity in your home? Want a lower payment? An appraisal from Meyer Lane Appraisals can help you get rid of your PMI.
It's typically inferred that a 20% down payment is common when purchasing a home. The lender's risk is usually only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they get the money if the borrower is unable to pay, contradictory to a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise homeowners can get off the hook sooner than expected. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify plummeting home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Meyer Lane Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Hatboro, Montgomery County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: