Have equity in your home? Want a lower payment? An appraisal from Bain & Associates, Inc. can help you get rid of your PMI.
A 20% down payment is typically the standard when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in the event a borrower defaults on the loan and the worth of the home is less than what is owed on 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 can be expensive to a borrower. It's money-making for the lender because they obtain the money, and they get paid if the borrower defaults, opposite from a piggyback loan where the lender consumes 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 buyer refrain from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things cooled off.
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 hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Bain & Associates, Inc., we're experts at analyzing value trends in Frisco, Collin 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 usually cancel 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: