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 typically the standard when purchasing a home. Since the risk for the lender is often only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value changesin the event a purchaser is unable to pay.
Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, contradictory to 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 a buyer avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen homeowners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
Considering it can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, 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're experts at identifying value trends in St Johns, Saint Johns County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually 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: