Have equity in your home? Want a lower payment? An appraisal from Mark Schofield Appraisal Services can help you get rid of your PMI.
It's generally understood that a 20% down payment is common when purchasing a home. Considering the risk for the lender is generally 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 changesin the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners refrain from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook beforehand. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Considering it can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things cooled off.
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 difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Mark Schofield Appraisal Services , we're masters at analyzing value trends in St Johns, Saint Johns 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 drop the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: