Have equity in your home? Want a lower payment? An appraisal from John Petz Appraisal can help you get rid of your PMI.
It's typically known that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser is unable to pay.
The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in the event a borrower defaults on the loan and the value of the house is lower than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. It's profitable for the lender because they secure the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook sooner than expected. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Since it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have acquired equity before things cooled off.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At John Petz Appraisal, we're experts at recognizing value trends in Melbourne, Brevard County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At that 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: