Have equity in your home? Want a lower payment? An appraisal from Higdon & Associates can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan.
PMI can be expensive to a borrower on the grounds 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 takes in all the damages, PMI is money-making for the lender because they obtain the money, and they get paid 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 a homebuyer prevent paying 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 beginning loan amount. Smart homeowners can get off the hook a little earlier. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things simmered down.
The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Higdon & Associates, we know when property values have risen or declined. We're experts at identifying value trends in Antioch, Contra Costa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: