Have equity in your home? Want a lower payment? An appraisal from Aaron Still Appraisal can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Because the liability for the lender is often only the difference 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 regular value variationson the chance that a purchaser doesn't pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they secure the money, and they get the money 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 homebuyers can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute home owners can get off the hook beforehand. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Aaron Still Appraisal, we're experts at recognizing value trends in Baker City, Baker County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which 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: