Have equity in your home? Want a lower payment? An appraisal from G. W. Real Property Analysts can help you get rid of your PMI.
It's widely understood that a 20% down payment is accepted when purchasing a home. The lender's risk is usually only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value variations on the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they obtain the money, and they get the money 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 home owners can prevent bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is only 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At G. W. Real Property Analysts, we're masters at recognizing value trends in Wallingford, New Haven County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little effort. 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: