Have equity in your home? Want a lower payment? An appraisal from Higdon & Associates can help you get rid of your PMI.
It's generally understood that a 20% down payment is accepted when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan guards the lender in the event a borrower defaults on the loan and the worth of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay, contradictory to a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy home owners can get off the hook beforehand. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, all of the appreciation you've obtained over time 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 might not be minding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast plunging home values, you should realize that real estate is local.
The hardest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Higdon & Associates, we know when property values have risen or declined. We're masters at pinpointing value trends in Antioch, Contra Costa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: