Have equity in your home? Want a lower payment? An appraisal from Meyer Lane Appraisals can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value variationsin the event a purchaser defaults.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy guards the lender in the event a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they collect the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook beforehand. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things settled down.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Meyer Lane Appraisals, we know when property values have risen or declined. We're experts at pinpointing value trends in Hatboro, Montgomery County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: