Have equity in your home? Want a lower payment? An appraisal from Kenneth R. Bush Associates can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. Since the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value variationson the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can avoid bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
Since it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's important to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.
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 hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Kenneth R. Bush Associates, we know when property values have risen or declined. We're experts at recognizing value trends in Cumberland, Providence County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At that 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: