Have equity in your home? Want a lower payment? An appraisal from Brevard Appraisal Group can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value variations on the chance that a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This added plan protects the lender if a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they collect the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the deficits.
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 keep from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Since it can take countless years to reach the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The hardest thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Brevard Appraisal Group, we're masters at analyzing value trends in Cape Canaveral, Brevard County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. 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: