Have equity in your home? Want a lower payment? An appraisal from Meyer Lane Appraisals can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Because the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower defaults.
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 prevent paying 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 guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.
Because it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends predict decreasing home values, realize 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 calmed down.
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 difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Meyer Lane Appraisals, we know when property values have risen or declined. We're masters at identifying value trends in Hatboro, Montgomery County and surrounding areas. Faced with information from an appraiser, the mortgage company will often drop the PMI with little trouble. At that 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: