Have equity in your home? Want a lower payment? An appraisal from Higdon & Associates can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the value of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is money-making for the lender because they secure 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 homeowner prevent bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook beforehand. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things settled down.
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 hard thing to know. 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 analyzing value trends in Antioch, Contra Costa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: