Have equity in your home? Want a lower payment? An appraisal from Mark Schofield Appraisal Services can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. Because the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value changesin the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the worth of the home is lower than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. It's advantageous for the lender because they collect the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners avoid bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, keen home owners can get off the hook ahead of time.
It can take many years to reach the point where the principal is only 20% of the original amount of the loan, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends hint at falling home values, you should understand that real estate is local.
The toughest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Mark Schofield Appraisal Services , we know when property values have risen or declined. We're masters at determining value trends in St Johns, Saint Johns County and surrounding areas. When faced with data from an appraiser, the mortgage company will often drop the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: