Have equity in your home? Want a lower payment? An appraisal from Mark Schofield Appraisal Services can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser is unable to pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender if a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they obtain the money, and they get the money 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 home buyers can prevent paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook sooner than expected. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Considering it can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things cooled off.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. 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 recognizing value trends in St Johns, Saint Johns County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: