Have equity in your home? Want a lower payment? An appraisal from Herrin Appraisal Company can help you get rid of your PMI.
It's typically known that a 20% down payment is the standard when buying a house. The lender's risk is oftentimes only the difference between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value changes on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the small down payment with 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 less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent paying PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Herrin Appraisal Company, we're experts at pinpointing value trends in Clemmons, Forsyth County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which 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:
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