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 buying a house. The lender's risk is generally only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook a little early. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends forecast plummeting home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things calmed down.
The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Mark Schofield Appraisal Services , we know when property values have risen or declined. We're experts at pinpointing value trends in St Johns, Saint Johns County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At which 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: