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 typically understood that a 20% down payment is the standard when purchasing a home. The lender's risk is generally only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations in the event a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the worth of the home is less than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is lucrative 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 homeowner refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.
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 hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Mark Schofield Appraisal Services , we're experts at pinpointing value trends in St Johns, Saint Johns County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually 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: