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 usually the standard. Considering the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser doesn't pay.
Banks were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This added plan guards the lender if a borrower doesn't pay on the loan and the value of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they acquire the money, and they receive payment 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 nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little earlier.
It can take many years to reach the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has increased in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough 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 data from an appraiser, the mortgage company will often remove the PMI with little trouble. 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: