Have equity in your home? Want a lower payment? An appraisal from Crescent Appraisal Group, Inc. can help you get rid of your PMI.
It's largely known that a 20% down payment is accepted when getting a mortgage. The lender's risk is usually only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value changes on the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender if a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they acquire the money, and they get the money 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 buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen home owners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home could have secured equity before things settled down.
The toughest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Crescent Appraisal Group, Inc., we're experts at determining value trends in Metairie, Jefferson County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually drop 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: